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There are some stories associated with the origin of the name Delhi. One of them is that it is derived from Dhillu or Dilu, a king who built a city at this location in 50 BC and named it after himself. Another one holds that the name of the city is based on the Hindi/Prakrit word dhili (loose) and that was used by the Tomaras to refer to the city because the Iron Pillar of Delhi had a weak foundation and had to be moved. Coins ,in circulation in the region ,at the time under the Tomaras were called dehliwal. According to the Bhavishya Purana, King Prithiviraja,of Indraprastha built a new fort in the modern-day Purana Qila area for the convenience of all four castes in his kingdom. He ordered the construction of a gateway to the fort and later, called the fort dehali. Some historians believe that the name is derived from Dilli, a corruption of dehleez or dehali—both terms meaning ‘threshold’ or ‘gateway’— and symbolic of the city as a gateway to the Gangetic Plain. Another theory suggests that the city’s original name was Dhillika.

The people of Delhi are referred to as Dilliwalahs or Delhiites. The city is referenced in various idioms of the Northern Indo-Aryan, languages. Examples include:

“Abhi Dilli door hai” or its Persian version, “Hanouz Dehli dour ast”, literally meaning Delhi is still far away, which is generically said about a task or journey still far from completion.

Dilli dilwalon ka shehr or Dilli Dilwalon ki meaning Delhi belongs to the large-hearted/daring.

Aas-paas barse, Dilli pani tarse, literally meaning it pours all around, while Delhi lies parched. An allusion to the sometimes semi-arid climate of Delhi, it idiomatically refers to situations of deprivation when one is surrounded by plenty.

Link(s) and Source(s):

1.http://www.quora.com/New-Delhi-India/Why-is-Delhi-the-capital-of-India-Why-is-it-named-Delhi_truncated

2. My Upcoming Book