The twenty-first century will witness a rapid urban expansion in the developing world. India, it is believed, will be at the forefront of such a phenomenon. This book acknowledges the role of agglomeration externalities as the cornerstone of urban public policy in India.
Arguing that hypotheses of over-urbanization and urban bias theory—which articulated a negative view of urbanization—are based on fragile theoretical as well as empirical foundations, this book calls for proactive public policy to harness planned urbanization as resource. India requires agglomeration-augmenting, congestion-mitigating, and resource-generating cities as engines of economic growth, including rural development.
The book provides a large number of practical examples from India and abroad to enable policy-makers undertake reforms in urban and regional planning, financing, and governance to meet the challenges of urbanization in India. It combines theory and practice to draw lessons for an urban agenda for India and recognizes the central role of cities in catalysing growth and generating public finance for economic development.
Chapter 5: Financing City Development and Services
Financing City Development and Services
The Urban Fiscal Crisis
Cities generate resources for all levels of government. However, city governments in India suffer from precarious finances. They face a huge fiscal gap, reflecting a gross mismatch between the expenditures required and the revenues available. In spite of being engines of economic growth and generators of national wealth, most cities do not have finances to meet even the establishment, operation, and maintenance expenses. They suffer from a “rich city–poor city government” syndrome. The issue is critical as the strength of agglomeration economies and ability of cities to contribute to GDP and public exchequers depend on how municipalities finance the infrastructure needed by firms and households now and in the decades to come. In ...