Overview for Fiscal Health of Selected Indian Cities
This paper provides an overview of the fiscal problems faced by five urban agglomerations in India, namely, Delhi, Hyderabad, Kolkata, Chennai, and Pune. It analyzes the fiscal health of the five urban agglomerations, quantifies their revenue capacities and expenditure needs, and draws policy recommendations on the means to reduce the gaps between revenue raising capacities and expenditure needs. The main findings suggest that, except for five small urban local bodies in Hyderabad, the others are not in a position to cover their expenditure needs by their present revenue collections. All the urban agglomerations have unutilized potential for revenue generation; however, with the exception of Hyderabad, they would fail to cover their expenditure needs even if they realized their revenue potential. Except in Chennai, larger corporations are more constrained than smaller urban local bodies. The paper recommends better utilization of"own revenue"through improved administration of property taxes, implementation of other taxes, and collection of user charges. It recommends that state governments should explore the option of allowing local bodies to piggyback a small proportion on their value-added tax collections. Another way to reduce the fiscal gap would be to earmark a portion of the sales proceeds from land and housing by state governments sold through their development agencies for improvements in urban infrastructure. The paper also recommends that the State Finance Commissions should develop appropriate norms for estimating expenditure needs, based on which transfers from the state to local governments can be decided.
Simanti Bandyopadhyay (Author)
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M Govinda Rao (Author)
Dr. M. Govinda Rao is the Director, National Institute of Public Finance and Policy, New Delhi, India. He is also a Member, economic. His past positions include Director, Institute for Social and economic Change, Bangalore (1998-2002) and Fellow, research school of Pacific and Asian Studies, Australian national University, Australia (1995-98). Dr Govinda Rao has a number of additional advisory roles. These include, member, International Advisory panel on Governance, UNDP regional Office, Chairman, Chairman, Expert Group on Taxation of Services (2000-01); Chairman, Technical experts Committee on VAT. He is also a Member of the Taxation Policy Group in the Initiative for Policy Dialogue (led by Prof. Joseph Stigliz). Dr Raoâ€™s research interests include public finance an fiscal policy, fiscal federalism and state and local fianc?. He has published technical articles extensively in a number of reputed journals besides 12 books and monography on various aspects of Public Finance. His recent books include, Political Economy of federalism in India, Oxford University Press, 2005, Sustainable Fiscal Policy for India: An International perspective (edited with Peter Heller), Oxford university Press, (2005) and Poverty, Development and Fiscal Policy, Oxford University Press, 2002 (Paperback, 2004).