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Urban governance and finance in India

Author

Listed:
  • M. Govinda Rao

    (National Institute of Public Finance and Policy)

  • Bird, Richard M.

    (Emeritus of Economics, University of Toronto, Toronto, Canada)

Abstract

Over 330 million people live in India's cities; 35 cities have a population of over a million and three (Mumbai, Delhi, and Kolkata) of the 10 largest metropolises in the world are in India. India's cities are large, economically important, and growing. However, neither urban infrastructure nor the level of urban public services is adequate for current needs, let alone to meet growing demands. Dealing with this problem is a formidable challenge. Not only must adequate finance for the provision of services be found but it is critical to ensure that the money spent results in desired outputs and outcomes. To do so, local governance structures also need to be reformed and strengthened. This paper attempts to point the way towards some possible solutions by analysing urban governance and finance in India in the context of lessons drawn from fiscal federalism theory and experiences of governance institutions and financing systems both in India and around the world. No one system of urban governance is likely to work equally well for all urban local bodies. However, the paper identifies some key reforms required to realise both the constitutional intent to encourage citizen participation in urban governance and the economic and politically desirable goal of ensuring greater accountability of urban governments. For example, the paper draws attention to existing ambiguities in the assignment system and underlines the need to undertake activity mapping to ensure clarity as well as to make independent agencies significantly accountable to elected governments in urban areas. The paper also discusses a variety of ways of augmenting the resources of the municipal bodies in the country including essential reforms in the property tax system and adequate exploitation of user charges and fees for various services delivered as well as ways of strengthening and improving Central and State transfers to urban local governments. With respect to financing urban infrastructure, development charges should be used more effectively. More should also be done to utilise public lands more effectively. In addition, to a considerable extent capital expenditure requirements will have to be financed through borrowing so further development of the municipal bond market is important, as is more and more effective use of public private partnerships in some areas.

Suggested Citation

  • M. Govinda Rao & Bird, Richard M., 2010. "Urban governance and finance in India," Working Papers 10/68, National Institute of Public Finance and Policy.
  • Handle: RePEc:npf:wpaper:10/68
    Note: Working Paper 68, 2010
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    References listed on IDEAS

    as
    1. Bandyopadhyay, Simanti & Rao, M. Govinda, 2009. "Fiscal health of selected Indian cities," Policy Research Working Paper Series 4863, The World Bank.
    2. R. Kavita Rao, 2008. "Goods and Services Tax for India," Macroeconomics Working Papers 22976, East Asian Bureau of Economic Research.
    3. Enid Slack & Juan R. Cuadrado-Roura & José Miguel Fernández Güell & Eduardo Rojas & Richard Bird & Jeroen Klink & Christian Lefévre & Joan Subirats & Quim Brugué & Andrés Monzón & Alberto Etchegaray, 2005. "Governing the Metropolis: Principles and Cases," IDB Publications (Books), Inter-American Development Bank, number 79939 edited by Juan R. Cuadrado-Roura & José Miguel Fernández Güell & Eduardo Rojas, February.
    4. János Kornai, 2014. "The soft budget constraint," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(supplemen), pages 25-79, November.
    5. Breton,Albert, 1996. "Competitive Governments," Cambridge Books, Cambridge University Press, number 9780521481021, December.
    6. Richard M. Bird & François Vaillancourt, 2006. "Perspectives on Fiscal Federalism," World Bank Publications, The World Bank, number 6953, June.
    7. Jonathan A. Rodden & Gunnar S. Eskeland (ed.), 2003. "Fiscal Decentralization and the Challenge of Hard Budget Constraints," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182297, September.
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    Cited by:

    1. Daniel Henstra & Jason Thistlethwaite, 2017. "Climate Change, Floods, and Municipal Risk Sharing in Canada," IMFG Papers 30, University of Toronto, Institute on Municipal Finance and Governance.
    2. Sharma, Purva, 2020. "Opportunities and struggles of decentralized governance reform for urban municipalities in India," World Development Perspectives, Elsevier, vol. 17(C).
    3. Simanti Bandyopadhyay, 2012. "Performance Evaluation of Urban Local Governments: A Case for Indian Cities," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1232, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    4. Simanti Bandyopadhyay, 2013. "Property Tax Reforms in India: A Comparison of Delhi and Bangalore," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1321, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

    More about this item

    Keywords

    India; Urban public finance; Urban governance; Intergovernmental fiscal relations; Property tax; Metropolitan areas; Infrastructure finance;

    JEL classification:

    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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