- Urban India drives nearly two-thirds of the national GDP but remains financially weak, with municipalities controlling less than one per cent of tax revenue.
- The 74th Constitutional Amendment Act (1992) empowered Urban Local Bodies (ULBs) to perform 18 functions listed in the 12th Schedule, including water supply, waste management, and public health.
- However, the corresponding financial devolution has been weak and inconsistent across States, resulting in a situation where responsibility is decentralised but revenue is not.
- Dependency on Higher-Level Transfers: Cities increasingly rely on tied and scheme-based grants, such as under the Smart Cities Mission or AMRUT, limiting local flexibility and innovation.
- Weak Own-Revenue Base: Property tax, user fees, and local cesses form the backbone of ULB revenues but together constitute only 20–25% of potential municipal income. Read More
Fiscal Challenges of Indian Municipalities
Context
Concerns over Fiscal Architecture of Municipalities
