Municipal Finance: The Historic Outlook

Abstract

Development and finance exist in a cohesive relationship that uplifts the city leading to the nation. Sound fiscal performance of the municipality is important for the growth of any city and, as a result, the need for robust municipal finance. This need for municipal finance in India has gained prominence and discussed with gravity over the past few decades. Many studies have identified the abysmal state of municipal finance and put forth distinct revamp models. This paper aims to map the traces of municipal finance structure and reforms envisioned, from the historical backdrop of three prominent periods of Indian history, precisely Pre-Independence, Post-Independence: Towards the 74th Constitutional Amendment Act (CAA), 1992 and Post-Independence: After the 74th Constitutional Amendment Act, 1992 and hence titled “The Historic Outlook.” It also focuses on the prevalent fragility of municipal finance in India and merges the knowledge of various reforms and their success to enhance the existing mechanism. The key findings of the paper suggest that municipalities encounter multiple problems of devolution of fiscal arrangements leading to an inadequate resource-base and hence shortfall in service delivery. Likewise, the fiscal deficit in municipalities is also the product of their over-reliance on state and central government due to their inability to raise their own-source revenue. The paper calls for significant reforms in municipal finance to confront the challenges of urbanisation envisioned under the 74th CAA, 1992.