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Fiscal health of selected Indian cities

Author

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  • Bandyopadhyay, Simanti
  • Rao, M. Govinda

Abstract

This paper provides an overview of the fiscal problems faced by five urban agglomerations in India, namely, Delhi, Hyderabad, Kolkata, Chennai, and Pune. It analyzes the fiscal health of the five urban agglomerations, quantifies their revenue capacities and expenditure needs, and draws policy recommendations on the means to reduce the gaps between revenue raising capacities and expenditure needs. The main findings suggest that, except for five small urban local bodies in Hyderabad, the others are not in a position to cover their expenditure needs by their present revenue collections. All the urban agglomerations have unutilized potential for revenue generation; however, with the exception of Hyderabad, they would fail to cover their expenditure needs even if they realized their revenue potential. Except in Chennai, larger corporations are more constrained than smaller urban local bodies. The paper recommends better utilization of"own revenue"through improved administration of property taxes, implementation of other taxes, and collection of user charges. It recommends that state governments should explore the option of allowing local bodies to piggyback a small proportion on their value-added tax collections. Another way to reduce the fiscal gap would be to earmark a portion of the sales proceeds from land and housing by state governments sold through their development agencies for improvements in urban infrastructure. The paper also recommends that the State Finance Commissions should develop appropriate norms for estimating expenditure needs, based on which transfers from the state to local governments can be decided.

Suggested Citation

  • Bandyopadhyay, Simanti & Rao, M. Govinda, 2009. "Fiscal health of selected Indian cities," Policy Research Working Paper Series 4863, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4863
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    References listed on IDEAS

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    1. Roy Bahl, 1999. "Implementation Rules For Fiscal Decentralization," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9803, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Peter Mieszkowski & Edwin S. Mills, 1993. "The Causes of Metropolitan Suburbanization," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 135-147, Summer.
    3. Mills, Edwin S. & Price, Richard, 1984. "Metropolitan suburbanization and central city problems," Journal of Urban Economics, Elsevier, vol. 15(1), pages 1-17, January.
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    Citations

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    Cited by:

    1. Roy Bahl, 2017. "Metropolitan city finances in Asia and the Pacific region: issues, problems and reform options," MPDD Working Paper Series WP/17/04, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    2. Simanti Bandyopadhyay, 2013. "Estimating Fiscal Health of Cities: A Methodological Framework for Developing Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1319, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Roy Bahl, 2012. "Metropolitan City Finances in India: Options for A New Fiscal Architecture," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1233, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    4. M. Govinda Rao & Richard M. Bird, 2011. "Coping with Change: The Need to Restructure Urban Governance and Finance in India," IMFG Papers 04, University of Toronto, Institute on Municipal Finance and Governance.
    5. M. Govinda Rao & Richard M. Bird, 2010. "Urban Governance and Finance in India," Governance Working Papers 21851, East Asian Bureau of Economic Research.
    6. Andrew Feltenstein & Nour Abdul-Razzak & Jeffrey Condon & Biplab Kumar Datta, 2015. "Tax Evasion, the Provision of Public Infrastructure and Growth: A General Equilibrium Approach to Two Very Different Countries, Egypt and Mauritius," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 24(suppl_2), pages 43-72.
    7. Simanti Bandyopadhyay, 2014. "Municipal Finance in India: Some Critical Issues," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1421, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    8. Simanti Bandyopadhyay, 2014. "Some New Thoughts on Performance Evaluation of Governments: An Application to Indian Cities," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1430, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    9. 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.
    10. 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.
    11. Simanti Bandyopadhyay, 2015. "Financial management and service delivery: a nonparametric analysis for Indian cities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(3), pages 721-751, May.
    12. Shah, Anwar, 2012. "Grant financing of metropolitan areas : a review of principles and worldwide practices," Policy Research Working Paper Series 6002, The World Bank.

    More about this item

    Keywords

    Public Sector Economics&Finance; Debt Markets; Municipal Financial Management; Public Sector Management and Reform; Banks&Banking Reform;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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