Civic bodies have primarily financed their capital expenditure from their revenue sources besides grants from the state and the Centre. On the other hand, municipal revenue sources are limited, forming just over 1% of the national GDP and recording annual growth of 15% between fiscals 2021 and 2024. This is because state-level policies and limited autonomy curb their abilities to raise taxes and user charges, resulting in inadequate cost recovery and impeded revenue growth.
An analysis of 30 key municipal corporations (metros, tier 1 and tier 2 cities) shows they generate 65% of their revenue, of which property tax alone contributes 60%.
These 30 municipal corporations have outstanding debt of Rs 13,000 crore as of March 2024, of which bonds are just 18%. Additionally, municipal bonds represent around 0.06% of the total outstanding corporate bond issuances as of September 2024. But only five of these 30 largest municipalities had revenue deficits.
But the country is undergoing an unprecedented jump in urban population, growing from around 28% in 2004 to around 36% in 2024 and projected to reach 40% by 2036. This requires not only enhancing civic infrastructure but also developing new facilities such as roads, drinking water supply, sewage disposal, solid waste management, street lighting, public health services, schools and hospitals and other public amenities among others.
