THEME OF THE FORTNIGHT

URBAN GOVERNANCE AND FINANCE

REPORTS

A Shared Vision for Technology and Governance

Authors: United Nations Development Programme (UNDP)

Publication Details: UNDP, 2023

Digitalisation is changing the practice and context of governance. The report explores the implications of emerging technologies first for the 'governance of digitalisation' – that is, the governance arrangements required to ensure that digital transformation is rights-based, inclusive, and supports the achievement of the Sustainable Development Goals (SDGs) – and secondly for the 'digitalisation for governance' – the implications of digital technologies for accountable, inclusive, and effective governance.

Report on Municipal Finances

Authors: Reserve Bank of India

Publication Details: Reserve Bank of India, 2024

The Reserve Bank of India's (RBI) Report on Municipal Finances 2024, titled "Own Sources of Revenue Generation in Municipal Corporations: Opportunities and Challenges," provides an in-depth analysis of the fiscal health of 232 municipal corporations (MCs) across India, covering over 90% of the nation's MCs.

Key Highlights of the report are:

While MCs have maintained a revenue surplus, they continue to rely heavily on financial transfers and grants from state and central governments. This dependence limits their financial autonomy and operational flexibility.
The report highlights that the insufficient Own Source Revenues (OSR) of most MCs is inadequate to cover their revenue expenditures. This inadequacy can impede their functional and financial independence.
Property taxes are identified as a significant revenue source for MCs. The report suggests that revenues could benefit from initiatives such as adopting Geographic Information System (GIS) mapping, implementing digital payment systems, establishing dynamic valuation methods, and enhancing monitoring to reduce leakages.
The RBI recommends that MCs undertake reforms in property tax, rationalize user charges, and improve collection mechanisms to enhance their own revenue sources. Such measures are deemed essential for providing better public services and achieving sustainable urban development.
The report emphasizes the importance of state-specific strategies to strengthen MC finances. This includes local taxation reforms, better enforcement, augmenting institutional capacity, and transparent financial management.
Additionally, a state-level rule-based system of compensation and transfers, including the regular establishment of State Finance Commissions (SFCs), is considered crucial for resilient municipal finances.

In conclusion, the RBI's report underscores the need for municipal corporations to enhance their own revenue generation capabilities through comprehensive reforms.

Indian Municipal Finance 2022: An Update

Authors: Mithlesh Verma, Amir Bazaz, Manish Dubey

Publication Details: Indian Institute for Human Settlements (IIHS), 2022

The report provides a comprehensive analysis of the financial health of Urban Local Bodies (ULBs) in India. It highlights the critical role of municipal finances in achieving the country's economic, developmental, and environmental objectives.

Key Highlights:

The report emphasizes that the current scale of municipal finances is insufficient to meet the growing demands of urbanization. ULBs's own revenue resources are significantly below their estimated potential, limiting their capacity to deliver essential services and infrastructure.
ULBs heavily rely on Intergovernmental Transfers (IGTs) from state and central governments. While these transfers are crucial, their scale in India remains around 0.5% of GDP, considerably lower than the international average of 2% to 5% of GDP.
The composition of revenue sources varies across cities of different sizes. Larger cities primarily depend on their own tax revenue, while smaller cities are more reliant on grants. This disparity indicates the necessity for tailored fiscal strategies.
The report notes that non-tax revenues, which include user charges intended to cover operation and maintenance costs, are insufficient.
To strengthen municipal finances, the report recommends several measures. A few of them are:
- Implementing reforms to improve property tax collection can significantly boost ULBs' own revenues.
- Utilizing land-based financing mechanisms can provide additional revenue streams for urban development.
- Adjusting user charges to reflect the cost of services can enhance revenue and ensure better service delivery.
- Increasing the scale and predictability of IGTs can provide ULBs with the necessary fiscal space to meet urban challenges effectively.

In conclusion, strengthening ULBs' financial capacities through enhanced own-source revenues and supportive intergovernmental fiscal frameworks is imperative for sustainable and equitable urban development.

RESEARCH PAPERS

An Analysis of Hotspots, Subject Structure, and Emerging Trends in Digital Governance Research

Author(s): Chuanfeng Sun, Guihuang Jiang, and Jingqiang Zhang

Publication Details: Sage Open, 2024

The widespread adoption of digital technology has catalysed a significant surge in digital governance (DG). This study undertakes a systematic analysis of 4,782 documents retrieved from the Web of Science (WOS) database. Through the application of bibliometric methods, it explores the landscape of research hotspots, evolutionary trajectories, and emerging trends in DG. The findings reveal that the key areas of focus within DG include corporate governance, digital finance governance, digital government governance, smart city governance, and Internet and digital platform governance. These topics demonstrate structural synergy and interconnectedness, with data serving as a pivotal element. Although variations in research emphasis exist across the evolution of specific DG topics, the overarching trend highlights a shift in the field from localised to globalised governance.

Measuring Progress of Smart Cities: Indexing the Smart City Indices

Authors: Calvin Ming Tsun Lai, Alistair Cole

Publication Details: Urban Governance, 2023

The ‘smart city’ represents a core feature of modern urban development. The appearance of numerous smart city indices, which claim to successfully evaluate and compare smart city performances, is the manifestation of the concept's growing popularity. The central objective of this paper is to address the integrity and quality of the existing smart city indices and identify those that are fit for international comparison. We propose a method for evaluating the integrity and quality of the existing smart city indices in terms of five criteria – Credibility, Reliability, Methodology, Versatility, and Precision. The article critically evaluates six smart city indices and concludes that the Cities in Motion Index from the IESE Business School has the best overall performance. To improve the versatility of the existing smart city indices, this paper proposes a new approach based on respecting three main criteria: refining the types of indicators, defining the smart city domains and adopting context-sensitive measurements. These elements are deemed to be essential for any smart city index.

Municipal Finance: A Study of Meerut Municipal Corporation in Uttar Pradesh

Author(s): Archana Jain, Archana Singh

Publication Details: Journal of Research in Humanities and Social Science, 2022

The paper examines the fiscal efficiency of Meerut Municipal Corporation(MMC) after the enactment of the Constitutional Amendment Act (CAA) 1992. CAA was enacted following the axiom of Oates’ Decentralisation Theorem. Oates conceptualised the role of local government to provide local public goods because of their superior knowledge of local preferences. Local governments were assigned various functions without giving them commensurate financial resources. Therefore, there is a great mismatch between revenue resources and expenditure responsibilities of local governments. The contribution of the paper is to discuss various sources of revenue and items of expenditure of Meerut Municipal Corporation. The fiscal efficiency of the MMC has been examined by various ratios including dependency ratio, quality of expenditure ratio etc. The main sources of revenue for MMC have been property tax and user charges to finance its expenditure but they are not sufficient and this revenue and expenditure gap is filled by transfers from the upper tiers of government. It results in the high dependency of MMC on state and central governments rendering lesser fiscal and financial autonomy. The paper provides suggestions, to improve the fiscal and financial health of the MMC.

Municipal Finance: A Study of Structural Changes in Kolkata Municipal Corporation

Authors: Chandreyee Som, Santanu Ghosh

Publication Details: Kolkata — The Colonial City in Transition, Reflections in Geographies of Urban India, Routledge India, 2022

This study aims to examine the structure of the budget of a local government, specifically the Kolkata Municipal Corporation (KMC), over the period 1995–96 to 2018–19. The research employs various statistical tools, such as line diagrams, pie diagrams, and trend lines. This chapter of the book “Kolkata — The Colonial City in Transition” explores the growth rates, trends, and patterns of total revenue receipts and total expenditures. It also highlights the changes in surplus or deficit and the growth patterns of the KMC's resources. Additionally, the study compares the components of tax revenue, non-tax revenue, government grants, and expenditures. Furthermore, it examines the concentration indices of tax revenue, non-tax revenue, government grants, and expenditures to gain insights into the evolving structure and composition of the budget. The findings indicate that property taxes have consistently dominated as the primary source of tax revenue for the KMC. However, since the mid-1990s, there has been little structural change in the budgetary position of the KMC.

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