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.This paper-a product of the Poverty Reduction and Economic Management Division, World Bank Institute-is part of a larger effort in the department to reform fiscal management for better governance. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The author may be contacted at simantib@nipfp.org.in.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.
The main objective of the paper is to assess the performance of urban local governments in India taking the physical levels of services provided by them as the 'outputs' and the expenditures on resources to provide these services as 'inputs' in an integrated framework and pinpoint some possible sources of mis-utilization of resources. We use nonparametric two-stage data envelopment analysis technique to derive the efficiency scores, with a subsequent analysis of slacks associated with the optimization exercise which quantifies the extent of mis-utilization of resources. The main findings suggest that the city governments can provide the same levels of services by using resources lesser by 27 % of what they currently use. We also find that the extent of unproductive spending and under-provision of services are more pronounced in smaller cities. Mis-utilization of resources in factors like establishment and laborcost is more pronounced as the establishment expenditures and contractual payments in the laborcost component involve more leakages.JEL Classification C6 · H4 · H7 · R1 · R5 · R15
The main objective of this paper is to examine the extent to which the capital city of Delhi has gained financial autonomy over the years. In order to better understand its progress, the paper compares the periods before and after the submission of the Third State Finance Commission Report of Delhi. The main findings suggest there have been some efforts to reduce reliance on transfers from upper tiers of government and to strengthen ‘own revenues’ atthe Municipal Corporation of Delhi (MCD). A greater diversification of tax and non-tax revenue sources is responsible for this improvement. In the second period, other tax sources such as corporation tax and electricity tax gained in importance. Non-tax revenues were also strengthened by higher collection of certain components such as conversion charges. However, own revenues have been inadequate to meet growing expenditure requirements, resulting in high revenue expenditure gaps. Further, the growth in Gross State Domestic Product (GSDP has not led to a rise in own revenues for MCD.Rather, the paper finds that higher GSDP and its tertiary sector components are associated with higher expenditures in MCD. As far as local revenues are concerned, higher GSDP is associated with higher transfers, but has no discernible impact on own revenues.
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