This study entitled Municipal Finance Matters: India Municipal Finance Study comes in at a time when there is increasing concern, both within and outside the government, for the country’s municipal sector, for its lackluster growth and performance, and its indifferent response to initiatives such as the 74th Constitution Amendment Act, 1992 and the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Several reports that have appeared over the past three years, in particular, the Report of the Thirteenth Finance Commission (TFC) (December 2009), the McKinsey Global Institute’s study on India’s urban awakening: Building inclusive cities, sustaining economic growth (April 2010), the High-Powered Expert Committee on Indian Urban Infrastructure and Services (March 2011), and the World Bank’s study on India: Developing a Regulatory Framework for Municipal Borrowing (October 2011), have all drawn attention to the persisting fragility of the municipal system and made important suggestions for its revamping.
This study on the finances of municipalities aims to reinforce and advance the suggestion that India’s municipal system is in need of major repair and reforms. It builds on the several leads that emerge from these reports and studies and delves into them in depth. The study suggests a way forward for municipalities to be able to effectively respond to the challenges that they face and will face in the coming decades.