Municipal Finance in India:Emerging Trends and Strategies for Resource Mobilization

Urban local governments are entrusted with a set of responsibilities of providing basic urban amenities and services to the people. They are dependent on states and centre for grant in aid and loans as the own resources of ULBs are grossly inadequate. There is mismatch between functions and municipal resources. The efforts for additional resource mobilization to fulfill the commitments by the ULBs are not adequate due to various factors. The ULBs are becoming dependent on transfers and fiscal devolution from central and state governments to meet out their financial requirements. Central Government has launched JNNURM and its subsidiary schemes for infrastructure development in selected cities and towns with massive financial investment. These schemes envisage strengthening of urban local bodies through introducing reforms and stepping up concrete efforts for additional resource mobilization. Thus, it is necessary to reduce dependence of local bodies on government support. They should effectively exploit the revenue potential through rationalization of assessment norms, simplification of procedures; rebate on timely payment, revision of old levies and taxes etc. Municipal governments may be allowed to enjoy fiscal autonomy with freedom of choice in regard to imposing new taxes and revising tax rates. It is argued that municipal bodies are not financially strong enough to tap capital market for undertaking infrastructure works which involve huge capital investment, long gestation period. But the provision of marketing borrowing will certainly motivate the municipal bodies to revamp their financial strength to mobilize resources from market. There is also need to encourage private sector involvement in the development, strengthening and creator of urban infrastructure. Against this backdrop , the paper purports to highlight the emerging trends in municipal finance and suggesting the measures for resource mobilization.