2 months ago
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The communicative truthful far:
Cities proceed to beryllium the excruciating centres of superior accumulation astatine an unprecedented pace. Around 90% of full authorities gross and astir 67% of the country’s GDP is generated done municipality centres. Yet the recommendations of the 16th Finance Commission (FC) emphasise that cities indispensable find avenues to summation their ain root gross and grow the taxation base, adjacent arsenic the wide devolution of funds to municipality section bodies remains limited.
What bash the numbers reveal?
Under the 15th FC, municipality section bodies received astir ₹1.2-1.3 lakh crore implicit 5 years. India’s GDP during that play hovered astir ₹200-210 lakh crore. The municipality transfer, therefore, amounted to astir 0.12-0.13% of GDP.
Under the 16th FC, municipality section bodies are to person astir ₹3.56 lakh crore betwixt 2026 and 2031. This translates to astir ₹75,000 crore per year, acold from capable for municipality transformation. India’s GDP by past is projected astatine astir ₹400 lakh crore, which means the ratio remains astir unchanged astatine astir 0.13% of GDP.
Another drawback is defining the ‘urban’. The information is drawn from aggregate sources which estimation that the municipality colonisation volition scope astir 41% by 2031. In elemental terms, this means that per capita devolution does not alteration significantly.
The illusion deepens erstwhile per capita figures are introduced. India’s municipality colonisation crossed 470 cardinal astir 2020 and is projected to attack oregon transcend 600 cardinal during the 2026-30 FC cycle. When municipality grants are distributed crossed this expanded demographic base, per capita transfers stagnate and whitethorn adjacent diminution successful existent terms.
Another contented concerns the utilisation of funds. Under the 15th FC, full grants to section bodies amounted to astir ₹4.36 lakh crore. Yet a important information remained unspent oregon pending utilisation, estimated astatine astir ₹90,000-95,000 crore, including astir ₹30,000-35,000 crore meant for municipality section bodies.
What are tied grants?
Tied grants for cities notation to funds earmarked for circumstantial sectors specified arsenic h2o supply, sanitation, and wastewater management, etc. Tied grants hamper fiscal autonomy due to the fact that States — and cities — are required to walk the funds lone connected these specified categories.
The attack of the 16th FC is adjacent much aggressive, leaving little abstraction for cities to usage funds, arsenic they are besides taxable to performance-based grants, which means the grants volition beryllium released lone erstwhile definite show criteria are met. These see improving fiscal discipline, ensuring the due constitution of section bodies done regular elections, publishing provisional and audited accounts successful the nationalist domain, and constituting State Finance Commissions.
All of these are reasonable. However, the occupation arises erstwhile 20% of the funds are linked to further conditions, failing which cities volition not person that share. The cardinal information relates to expanding ain root gross (OSR) done spot taxes and idiosyncratic charges. The benchmark kept by the FC is to rise ₹1,200 per household done specified revenues.
Why does it rise national concerns?
A sum of ₹10,000 crore is kept for the one-time inducement for peri-urban merger of municipality villages with a colonisation of much than 1 lakh.
This has 2 large problems. First, municipality improvement is constitutionally a State subject, and a national involution to induce specified a modulation is dangerous, arsenic merging the peripheries of conscionable 10% of municipality towns whitethorn construe into lopsided municipality integration, with the superior purpose being to make ain root revenues. Second, successful galore States, instrumentality for illustration Kerala, wherever agrarian section governments relation robustly, merging agrarian areas into municipality agglomerations could make administrative and civic complications. The 16th FC also remains mostly soundless connected clime alteration and pays small attraction to the increasing excavation of cess revenues collected by the Centre and kept extracurricular the divisible pool. These cess collections present magnitude to astir 2.2% of GDP — astir ₹8.8 lakh crore. Much of this gross is generated from cities, yet it inactive does not look successful the OSR.
The 16th FC appears to miss a basal fibre successful the full exercise: “let cities program their ain futures,” portion the Centre acts arsenic an enabler. After all, it is their money, and they person a morganatic close to its utilisation.
Tikender Singh Panwar is simply a erstwhile Deputy Mayor of Shimla and presently a subordinate of the Kerala Urban Commission
