Revenue Challenges of Municipal Corporations in India

The Reserve Bank of India (RBI) in November 2024 released a report highlighting revenue challenges faced by municipal corporations.

Key Findings

  • Indian cities contribute over 60% to GDP but rely heavily on government transfers.
  • Municipal revenue generation is only 0.6% of GDP (2023-24), far below the Centre (9.2%) and States (14.6%).
  • 74th Constitutional Amendment (1992) formalized urban governance:
    • Article 243X – Empowers states to authorize municipalities to levy taxes.
    • Article 243Y – Mandates State Finance Commissions (SFCs) to review revenue distribution.
  • Composition of Municipal Revenue
    • Taxes – 30%
    • Grants – 24.9%
    • Fees/User Charges – 20.2%

Financial Challenges

  • Municipal borrowings rose from Rs. 2,886 crore (2019-20) to Rs. 13,364 ....
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