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Options for Strengthening Municipal Finances
The extent and nature of intergovernmental transfers to our cities from the higher levels of governments have not been paid adequate attention in the report. International experience from both developed and emerging economies suggests a much higher level of IGT to local governments. The transfers are especially critical in view of the goods and services tax regime, which has left out any provision for the third tier of governments.
The Reserve Bank of India (RBI) published its maiden report on municipal finances in November 2022. It has incorporated details of municipal corporations that account for around 70% of the finances of the urban local bodies (ULBs) in India. It aims to expand this coverage on an ongoing basis. While the RBI has regularly published general government statistics since the early 1980s, this did not include local governments, as consolidated data on local government finances is not available. Its effort at this maiden report is valuable for putting a focus on urban local governments as they are critical for economic development. Adequate municipal finances are needed to ensure well-functioning cities necessary for economic development. It will also help India align with the Group of Twenty (G20) Data Gaps Initiative, commencing with the presidency.
Poor City Governments
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