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Those seriously injured in the blast will get Rs 1 lakh while in case of any death of minor, the family will get Rs 1.5 lakh. People who received minor injuries in the blast will be given Rs 10,000.
The compensation was announced after Chief Minister Sheila Dikshit visited the injured at the RML hospital.
Terming the incident as "very tragic", Dikshit said the Delhi government will provide all possible support to victims of the blast.
"It is a very unfortunate incident. It is a very tragic incident. So many people were killed and injured," she said.
Asked whether the Delhi police should be blamed for the blast, she said the probe ordered by Home Minister P Chidambaram will look into all aspects.
She directed the hospital administration to provide the "best treatment" to the injured.
"People are being treated here. They are naturally under shock and I met them and their relatives. Nine people who were killed and 42 injured have been brought to RML Hospital. Doctors are attending on the injured. Every possible attention is being given to the injured," Dikshit told reporters.
Dikshit also directed the health department to provide best medical care to all those admitted in Safdurjung and other hospitals.