Indian Municipal Finance 2023
This study examines decadal time-series data from 33 Urban Local Bodies (ULBs) of varying sizes across India. The analysis reveals persistent challenges, including high dependence on Inter-Governmental Transfers (IGTs), fluctuations in tax revenue, and limited spending on Operations and Maintenance (O&M). Capital expenditures are primarily driven by program-based IGTs, prompting a reevaluation of strategies to enhance own revenue mobilization. The study emphasizes the link between revenue efforts and O&M, advocating for improved current spending to sustain existing infrastructure and support new investments.
Opportunities lie in designing IGTs to encourage revenue mobilization and exploring commercial financing options among ULBs. Strengthening state financial intermediaries is crucial for achieving these goals. Fluctuations in tax revenue, especially during real estate booms, suggest room for streamlining efforts. The study also applauds smaller cities for prioritizing local concerns in capital expenditure, potentially addressing broader financial challenges faced by Indian ULBs.