Here's why:

* Calcium oxide is a basic oxide. Basic oxides react with water to form bases (alkalies).

* Litmus paper is an indicator. Red litmus paper turns blue in the presence of a base.

The reaction of calcium oxide with water is as follows:

```

CaO + H₂O → Ca(OH)₂

```

Calcium oxide (CaO) reacts with water to form calcium hydroxide (Ca(OH)₂), which is a strong base. This base then changes the color of the red litmus paper to blue.