Strengthening Municipal Finance

Property owners are likely to be more willing to pay higher taxes if they are made aware that the money will be used to improve services.

Indian cities, despite their significant contribution to the national gross domestic product at nearly 70%, remain poor without adequate resources to meet their mandates. Recently, Indian cities have been affected the most by the Covid-19 pandemic. A prolonged lockdown has also affected municipal own revenues significantly. For cities to remain at the forefront of the battle against Covid-19, it is critical to ensure that they have access to adequate and predictable financial resources. 

Despite driving much of India’s economic growth, municipal governments remain financially weak due to limited fiscal autonomy and dependence on state-controlled resources. This chapter explores ways to strengthen their finances through better revenue generation, predictable funding, and supportive policy reforms.

Delayed payments from urban local bodies (ULBs) are a major concern for private enterprises, especially small and medium ones in smaller cities. This affects service delivery in areas like Faecal Sludge and Septage Management (FSSM), drain cleaning, and solid waste management. The financial uncertainty discourages private participation and strains working capital. This section reviews existing efforts and explores innovative solutions to address delayed payment risks.