The health of municipal finances is a critical element of municipal governance which will determine whether India realises her economic and developmental promise. The 74th Constitution Amendment Act was passed in 1992 mandating the setting up and devolution of powers to urban local bodies (ULBs) as the lowest unit of governance in cities and towns. Constitutional provisions were made for ULBs’ fiscal empowerment. However, three decades since, growing fiscal deficits, constraints in tax base expansion, and weakening of institutional mechanisms that enable resource mobilisation remain challenges. Revenue losses after implementation of the Goods and Services Tax (GST) and the pandemic have exacerbated the situation.
Comprehensive data sets on municipal finance are important to understand and counter these challenges, but few exist at the city level. Recently, the Indian Institute for Human Settlements (IIHS) analysed data from 80 ULBs across 24 States between 2012-13 and 2016-17 to understand ULB finance and spending, and found some key trends.
