Home » Indian Polity » Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein. » Devolution of Powers and Finances up to Local Levels and Challenges Therein. » 74th amendment act- Municipalities » Present status of urban local bodies
- A study conducted by the 15th Finance commission, highlight the following concerning trends in Municipal finances:
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- Low municipal revenue to GDP Ratio, which has remained stagnant at around 1% of GDP during the period from 2007 to 2017-18
- The same ratio is 6% for South Africa, 13.9% for United Kingdom
- Declining own revenue: The share of municipal own revenue in total municipal revenues has declined significantly from 55% in 2007-08, to 43% in 2017-18
- Low diversification of tax resources
- At present, property tax remains the only major tax in the municipal portfolio in India, and it has contributed to about 60% to municipal tax revenue in India
- By contrast, municipalities in other parts of the world have access to a much wider basket of taxes
- Inadequate intergovernmental transfers: While share of intergovernmental transfers in municipal revenue has been increasing since 2010-11, it still remains insufficient
- Low per capital expenditure
- Even though per capita municipal expenditure has increased in India, it still lags far behind in per capita spending when compared to other countries
- India’s per capita spending is $17, as against $116 of China
- According to NITI Aayog, India requires Rs.40 trillion investment until 2030 to overhaul its infrastructure, whereas the revenue of all the municipal corporation put together is not more than 1.2 trillion
