The government also hinted at undertaking "austerity drive" and reviewing "functioning of unncessary departments" to plug the wastage of resources.
Chief Minister Arvind Kejriwal told the Delhi Assembly that after taking people's opinion on the budget, detailed discussions will be held in the House where legislators will take a final call.
He said the initiative will be launched on a pilot basis in 5-10 Assembly constituencies.
"Everytime when budget is being made, there is a request from various departments to enhance their budget. Although these departments have their budget enhanced, work is not done at the ground level.
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Kejriwal said people should have a say on how the funds are spent in their areas and the initiative was an effort to involve the citizens in governance.
"The budget will be made based on the need of the people. We will start the initiative on a pilot basis," he said.
"It is important to bring change in the system through governance and education. People say from where will the money come from? First, corruption has to be cut down. The budget for building roads in Delhi is Rs 5000 crore annually. With this amount, one can come up with a new smart city.
"We have to review different departments and plug wastage of resources. We might also have to undertake austerity drive or rethink on the practices and policies which have been going on for ages," Sisodia said.