Pragmatic Municipal Finance Reform in India

Abstract

The 74^th Constitutional Amendment Act (CAA) enacted in 1993 gave urban local governments constitutional status and aimed to strengthen municipal governance. Municipalities were to be given greater responsibilities in the provision of basic infrastructure and social services and financial power was also to be devolved. Now, seventeen years since the passage of this constitutional amendment, the promise held out by decentralization has remained largely unrealized. In this context, the intention of this paper is to recommend specific policy initiatives for municipal governance reform in India. In drawing up these recommendations, the paper analyses two broad sources, namely the policy environments for local government in post-Apartheid South Africa and post-democracy Brazil. South Africa and Brazil are instructive case studies because they too, like India, are trying to address the issues of widespread poverty and inequality in a democratic framework. Additionally, they are widely recognized as having innovated in many aspects of the policy framework for local government and service delivery.

Based on our analysis, we recommend pragmatic changes in aspects of property tax, municipal finance, community involvement and models of service delivery as the levers to improve urban governance and service delivery.