Municipal Finance in India: Some Critical Issues

With the help of the available literature, the paper attempts to assess critically the main problems of municipal finances in India and to bring out the challenges that the municipalities face with respect to revenue generation and expenditure management. The main findings suggest that the urban local bodies in India are confronted with lack of proper decentralization of functions and finances, inadequate revenue generation, expenditure shortfalls leading to poor service delivery. It also analyses the suggestions and recommendations that have been offered in the literature to cope with these critical challenges relating to urban finance. 1 The paper was initiated when the author was on Deputation from NIPFP as a Senior Fellow to ICRIER. The author would like thank Dr. Isher Judge Ahluwalia for her help in different stages of the work. Sincere thanks are due to Mr. Debraj Bagchi for his excellent research assistance. However, the usual disclaimer applies. 2 International Center for Public Policy Working Paper Series