Delhi seeks ₹10K cr loan from NSSF to fund welfare schemes

NEW DELHI: As Delhi prepares for its upcoming Assembly elections, the Delhi government has moved to borrow Rs 10,000 crore from the National Small Savings Fund (NSSF) for the financial year 2024-25. This decision, however, comes amid resistance from within the Delhi Finance Department, which had expected a lower fiscal outlay due to the impending Model Code of Conduct (MCC) that typically limits government spending during election periods.

Chief Minister Atishi, who holds the finance portfolio, approved the borrowing plan and directed the finance department to formally request the funds from the Ministry of Finance. Despite the objections, Atishi’s decision signals the government’s intention to continue its ambitious welfare initiatives, which have become central to the Aam Aadmi Party’s election campaign.

The proposal to borrow from the NSSF, however, has drawn criticism from Principal Secretary (Finance) Ashish Chandra Verma. In his recommendation, Verma warned against taking out the loan, arguing that the long-term financial burden would be too great. He pointed out that the NSSF borrowing would result in additional interest payments amounting to Rs 45,980 crore by 2039, on top of the Rs 1.27 trillion principal repayment. Verma also suggested that Delhi should withdraw from the NSSF scheme altogether to avoid these future liabilities.

The NSSF, which is sourced from small savings schemes and managed by the Government of India, has been a borrowing mechanism for only a few states, including Delhi, Arunachal Pradesh, Kerala, and Madhya Pradesh. Most states prefer market borrowings, which tend to be more cost-effective. Delhi had previously borrowed Rs 3,721 crore from the NSSF in 2022-23 but refrained from borrowing in the following year.

The government, however, defended the loan request, stating that borrowing was a routine part of fiscal planning, especially considering the city’s economic conditions and administrative requirements. A Delhi government spokesperson pointed to the Economic Survey of Delhi 2023-24, which reported a significant reduction in the city’s debt-to-GDP ratio, now at 3.9 per cent, the lowest in Delhi’s history.

As the AAP intensifies its “revdi” campaign with promises of free electricity, water, education, and healthcare, the loan request is seen as a way to fund these welfare schemes ahead of elections. Critics, however, warn that the timing and financial burden may harm the city’s long-term fiscal health.