India's City Economies
Who Runs Indian Cities?
Why Indian cities have weak local governments and limited finances, how this holds back growth, and a recap of the module.
Indian cities often have weak local governments.
The problem
- The 74th Constitutional Amendment (1992) aimed to empower urban local bodies, but many powers remain with state governments.
- Mayors often have limited powers and short terms.
- Many functions are split among parastatal agencies for water, development and transport.
Weak finances
- Municipal revenues are a small share of GDP, well below those in many countries.
- Property tax collection is low due to outdated valuations and poor coverage.
- Cities depend on state and central grants.
Consequences
- Poor infrastructure and services.
- Unplanned growth.
- Slow response to problems like floods.
Ideas for reform
- Empowered mayors with longer terms.
- Better property tax systems using GIS mapping.
- Municipal bonds, which cities like Pune, Ahmedabad and Indore have issued.
Module recap
- Cities generate well over half of India’s GDP.
- Bengaluru leads tech; Hyderabad pharma and IT; Chennai cars.
- Delhi NCR thrives on services; Dharavi on small industry.
- Kolkata declined but is reviving; Surat polishes diamonds.
- Pune and Ahmedabad diversified.
- Smaller cities are rising.
- Weak city governance limits growth.
The municipal bond
Indore issues municipal bonds to fund a water project. Investors buy them, and the city gets money without waiting for state grants.
Thinking mayors run Indian cities like global mayors
Many powers rest with state governments and parastatals.
Key takeaways
- Indian city governments often have limited powers.
- Property tax collection is low.
- Weak governance leads to poor services.
- Empowered mayors, better taxes and bonds could help.
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