Strengthening the Financial Health of Indian Cities & Indian Urban Schemes & Initiatives

Session Report
Kashish Narang

Urban Policy & City Planning is an online one-month online immersive certificate training course organized by Center for Habitat, Urban and Regional Studies at Impact and Policy Research Institute, IMPRI, New Delhi in the month of July 2023. An informative and panel discussion on the topic “Strengthening the Financial Health of Indian Cities & Indian Urban Schemes & Initiatives” was held on July 12, 2023, by Dr Soumyadip Chattopadhyay Associate Professor, Visva-Bharati, Santiniketan, Visiting Senior Fellow, IMPRI.

Initially, Dr Soumyadip Chattopadhyay provided us with an overview of his upcoming presentation, focusing on the ways by which Indian cities can enhance and fortify their financial well-being.

Urban Health

He commenced by presenting macro statistics to demonstrate the weak condition of municipal health. The proportion of municipal revenue to the GDP has remained steady at approximately 1%. The contribution of self-generated revenue to the country’s GDP remains around 0.43%. Smaller urban local bodies (ULBs) have exhibited inadequate performance in terms of generating revenue. The issue of resource scarcity intensified as ULBs were assigned additional duties and obligations.

He presented two potential policy approaches to tackle these issues:

  1. Increasing revenue from existing local taxes
  2. Strengthening the revenue raising power of the ULBs by broadening the sources of revenue base 

He subsequently acquainted the audience with a Simple model of municipal taxation – the Standard Bahl and Linn 1992 model. He then discussed basic problems with municipal taxation in India, such as mismatches between revenue and obligations, underutilization of available tax tools, and so forth.The primary challenge lies in identifying and prioritizing opportunities that can yield significant impact and are reasonably feasible.

Criteria for choosing municipal taxes include efficiency, equity, economy, transparency and more. Property tax remains a significant untapped reservoir of municipal revenue. He then outlined the principal sectors requiring action in property tax reforms.Determining the tax rate was addressed, covering challenges and potential policy strategies.

He also discussed a range of non-tax revenue mechanisms. He proceeded to elaborate on the fundamental principles that policymakers should bear in mind when formulating both tax and non-tax measures. 

In conclusion, he provided a recap of the various methods through which municipalities generate funds and highlighted potential possibilities for enhancing their financial well-being. He emphasized the need for municipalities to reduce dependency on Central and State governments while strengthening their own financial base.

Dr. Rumi recommended that the audience examine the municipal budgets of different municipalities to gain insights into their funding sources. Dr Rumi moved on to introduce the final speaker, Dr. Akshaya K Sen, and provided a brief insight into the chosen theme.

Kashish Narang is a Research Intern at IMPRI.

Read more session reports for Urban Policy & City Planning:

An overview of Urban planning in India

Financing of Urban Infrastructure in India: Issues and Way Forward

Cities, Environment, Climate Change & Social Justice

Urban Policy & City Governance in New India: Challenges & Opportunities

A Way Forward for Urban Planning & Governance in Indian Cities

India’s Urban Development Schemes: Impact & Way Forward

The Missing Links in Governing Cities

Urban Planning in India



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