Delhi’s economic model: A blueprint for the future
Our country is in the midst of an unprecedented economic crisis. Our GDP growth rate declined from 7.1% in 2016-17 to 5.2% in the first quarter of 2019-20, and dipped further to 4.5% in the second quarter. Unemployment in the country has reached a 45-year high, even as the country battles with multiple economic issues such as the banking crisis, low investor confidence and people, at large, cutting back on consumption. This is the time for deep introspection.
Meanwhile, the economy of Delhi has grown from strength to strength in the last three years. Our Gross State Domestic Product (GSDP) has risen from 7.54% in 2016-17 to 8.81% in 2018- 19. Delhi’s state budget, which receives negligible support from the Centre and depends entirely on revenue collections from within Delhi, has doubled from ~31,000 to ~60,000 in the past five years, despite growing by only ~5,000 crore in the preceding five years from 2009 to 2014. While Delhi’s economy is only a small microcosm as compared to that of India, there are important shortterm and long-term lessons from Delhi’s success story for the rest of India.
Soon after coming to power, the Aam Aadmi Party (AAP) government initiated several long-term measures to boost the confidence of the business community. We first suspended the raid raj of our tax department. Instead, we began trusting our traders, based on the belief that if they saw an honest government spend their taxes effectively, they would come forward and contribute. We also cut back on high VAT rates for several goods with a belief that lower tax rates would lead to higher compliance — a position that we continue to hold when protesting against high GST rates of 28% in many categories. These and other business reforms have led to a record boost in the Delhi government revenues.
At the same time, we have laid a very strong foundation for the future of Delhi by investing directly in our people. Junking an economic model that favours offering large subsidies and loan waivers to corporates, popularly called the trickle-down model, we adopted a model that prioritises the education and health of our people above everything else. We firmly believe that it is the people who make the nation. India can forget becoming a superpower if 50% of its children in primary schools cannot read, one in every three children remains malnourished, and if half of all those who pass Class 12 don’t have employable skills — all of which are a reality today.
Today, Delhi is the only state with over 25% of its budget allocated to education and 13% to health care. Delhi’s government schools have seen an unprecedented transformation in the last five years and have consistently performed better than Delhi’s private schools. Stories of parents switching from expensive private schools to government schools abound. Our network of mohalla clinics, polyclinics and speciality hospitals provide free diagnostics, medicines and quality treatment to anyone irrespective of their annual income. This is backed by a government scheme that guarantees free treatment in private hospitals in case a government hospital fails to provide timely treatment in 30 days.
In the short-term too, rather than subsidising corporates, we decided to subsidise the lives of our citizens. The Delhi government has introduced targeted subsidy schemes across multiple sectors — water, electricity, health, education, public transport — that have provided basic dignity of life and a safety net to every family living in Delhi. The subsidies have also increased the disposable income of every family. For example, Delhi provides free lifeline electricity up to 200 units per month and lifeline water up to 20,000 litres per month for every household. Experts have estimated that each household in Delhi saves an average of ~4,000 per month as a direct result of the various schemes of the Delhi government. This translates to ~24,000 crore per annum in additional consumption into the local economy as a direct result of the Delhi government’s policies — a true win-win situation.
Investing directly in the health, education and welfare of our people is no longer a social and moral agenda, it is also a long-term economic agenda. I am proud that Delhi has shown a model for what could be an alternative economic growth vision for the rest of India.
Arvind Kejriwal is the chief minister of Delhi The views expressed are personal