Boosting Municipal Finances: A Call for Tax Reform and Revenue Growth

Municipal corporations in India must reform property taxes and enhance revenue collection to thrive financially, an RBI report suggests. Strong local taxation and capacity-building are crucial. Despite pandemic-hit revenues recovering, MC receipts remain low compared to government counterparts. Emerging green bonds reflect a shift towards sustainable development.

An RBI report urges municipal corporations to reform property tax structures and enhance revenue collection mechanisms to fortify their financial standing. The move is essential as urban populations rise, driving up demand for quality public services, the report highlights.

Indian municipalities remain overly reliant on state and central government funds, constraining their operational agility. Compared to international counterparts, these municipal bodies generate far less revenue as a percentage of GDP, limiting service offerings.

The burgeoning field of municipal bonds, including green options, signifies a shift toward fiscally sustainable urban development. Despite recent gains post-pandemic, municipal revenue streams remain modest compared to national and state governments.

(With inputs from agencies.)