RBI report on municipal finances

RBI report on municipal finances


The first comprehensive and official report on municipal finances released in November aims at making local government statistics available in a consolidated form to improve the coverage and sectoral classifications of India’s Flow of Funds (FoF) accounts. “Municipal Finance in India – An Assessment” is the title of the study undertaken by the Reserve Bank of India to examine the performance of Urban Local Bodies (ULBs). It parses the finances of 35 municipal corporations of cities that have more than a million people as per the Census Survey 2001, analyses the reasons for their differential performance on fiscal parameters, in the context of the civic amenities they provide. 

Municipal finance refers to the budget, revenue, and expenditure of the municipal corporations which helps to plan, mobilise, and utilise financial resources to provide civic services and amenities. The role of municipal corporations, or ULBs, is growing as India’s urban population expands and cities expand. The report is an important addition to the libraries of urban planners, finance wizards, urban policymakers, politicians, decision-makers, and in fact anyone with a passing interest in how cities are planned, financed and built. 

The report touches on a critical subject: the inadequate budgets of municipal corporations. There has been no distinct rise in overall municipal revenue in cities across India even as their responsibilities and functions increased considerably over the years, making them increasingly dependent on the Centre or on state grants, the report points out. “Most municipalities only prepare budgets and review actuals against budgeted plans but do not use their audited financial statements for balance sheet and cash flow management, resulting in significant inefficiencies,” says the report, stressing on proper monitoring and documentation of various receipt and expenditure items. The report suggests alternative sources of financing for municipal corporations.

The state-wise chapters can be accessed here.