Financing Indian Cities : Opportunities and Constraints in an Nth Best World

This paper examines international experience with mobilizing funding for both capital and recurrent costs for municipal infrastructure with a view to identifying areas where India could improve its system of financing infrastructure in cities. Base...

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Bibliographic Details
Main Author:	Annez, Patricia Clarke
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	AGGLOMERATION ECONOMIES AIRPORTS ASSETS AUTONOMY BANKING SECTOR BANKING SERVICES BANKING SYSTEM BETTERMENT LEVIES BOND BANKS BOND ISSUANCE BOND ISSUES BOND MARKETS BRIDGE BUILDING MATERIALS BUS BUS STATION BUS SYSTEM BUS TRANSPORT BUSES BUSINESS TAXES CAPACITY BUILDING CAPITAL BASE CAPITAL COSTS CAPITAL EXPENDITURES CAPITAL GRANTS CAPITAL INVESTMENT CAPITAL INVESTMENTS CAPITAL MARKETS CAPITAL SUBSIDIES CAR CAR OWNERSHIP CAR USE CENTRAL GOVERNMENTS CITY MANAGEMENT COMMERCIAL BANKS COMMUTER RAIL CONGESTION CONGESTION CHARGING CONGESTION PRICING COSTS OF ROAD USE COSTS OF ROADS DEFICITS DEVELOPMENT AUTHORITIES DEVELOPMENT BANKS DEVOLUTION DISTRIBUTION OF INCOME DRAINAGE ECONOMIC ANALYSIS ECONOMIES OF SCALE ELECTRICITY ELECTRICITY SERVICES ENVIRONMENTAL IMPACTS EXPRESSWAYS EXTERNALITIES FARES FINANCIAL INSTITUTIONS FINANCIAL SERVICES FISCAL DECENTRALIZATION FISCAL DISCIPLINE FISCAL FEDERALISM FISCAL REFORM FISCAL RESPONSIBILITY FIXED CHARGES FLOOR AREA FUEL FUEL TAXES GOVERNMENT RELATIONS GOVERNMENT SPENDING HIGHWAY HOUSING INCOME DISTRIBUTION INCOME TAXES INFRASTRUCTURE DEVELOPMENT INFRASTRUCTURE FINANCE INFRASTRUCTURE INVESTMENT INSTITUTIONAL ARRANGEMENTS INTERGOVERNMENTAL TRANSFERS LAND USE LAND VALUE LARGE CITIES LAWS LEGISLATION LEVEL OF MOBILITY LEVIES LICENSES LIGHT RAIL LIQUIDITY LOCAL FINANCING LOCAL GOVERNMENT LOCAL GOVERNMENT BORROWING LOCAL GOVERNMENT FINANCE LOCAL GOVERNMENT REVENUES LOCAL GOVERNMENT SPENDING LOCAL GOVERNMENTS LOCAL LEVEL LOCAL REVENUE LOCAL SPENDING LOCAL TAXES LOCAL URBAN SERVICES LOW COST HOUSING MARGINAL COST PRICING METROPOLITAN TRANSPORTATION MOTOR VEHICLE MOTOR VEHICLE USE MUNICIPAL MUNICIPAL ADMINISTRATION MUNICIPAL BANKS MUNICIPAL BONDS MUNICIPAL CORPORATIONS MUNICIPAL CREDIT MUNICIPAL DEVELOPMENT MUNICIPAL FINANCE MUNICIPAL FUNDS MUNICIPAL INFRASTRUCTURE MUNICIPAL LEVEL MUNICIPAL SERVICES MUNICIPALITIES NEIGHBORHOODS O&M OCTROI OPERATING COSTS OWN SOURCE REVENUE OWN SOURCE TAXES PARKING FEES PER CAPITA INCOME POLITICAL ECONOMY POLLUTION POVERTY REDUCTION PRIVATE AUTOMOBILES PRIVATE GOODS PRIVATE SECTOR PROPERTY RIGHTS PROPERTY TAX BASE PROPERTY TAXES PUBLIC PUBLIC FINANCE PUBLIC GOODS PUBLIC POLICY PUBLIC POLICY OBJECTIVES PUBLIC RESOURCES PUBLIC SECTOR PUBLIC SERVICES PUBLIC TRANSPORT PUBLIC TRANSPORT SERVICES PUBLIC TRANSPORT SUBSIDIES PUBLIC TRANSPORT SYSTEM PUBLIC TRANSPORTATION PUBLIC TRANSPORTATION SYSTEM RAIL COMPANY RAIL LINES REAL ESTATE MARKETS REGISTRATION FEES RENTAL HOUSING RESERVE BANK OF INDIA RESOURCE MOBILIZATION REVENUE SOURCES RING ROAD ROAD NETWORK ROAD USE ROADS SALES TAXES SANITATION SAVINGS SETTLEMENTS SEWERAGE SERVICES SLUMS SOLID WASTE COLLECTION SPECIALIZED BANKS STATE GOVERNMENT STREET LIGHTING STRUCTURAL CONSTRAINTS STRUCTURAL ELEMENTS STRUCTURAL REFORMS SUBNATIONAL GOVERNMENTS SUBURBAN RAIL TAX TAX REVENUE TAX REVENUES TAXATION TELECOMMUNICATIONS TOLL TOLLS TRAINS TRANSPARENCY TRANSPORT MODES TRANSPORT STRATEGY TRANSPORTATION INFRASTRUCTURE TRANSPORTATION INVESTMENTS TRANSPORTATION PLAN TRANSPORTATION SYSTEM TREASURY TRIPS TRUE URBAN CONGESTION URBAN DEVELOPMENT URBAN ECONOMY URBAN GOVERNANCE URBAN GROWTH URBAN INFRASTRUCTURE URBAN POOR URBAN ROAD URBAN ROADS URBAN TRANSPORT URBAN TRANSPORT SYSTEMS URBAN TRANSPORTATION URBANIZATION USER CHARGES UTILITIES VEHICLE VEHICLE COSTS VEHICLE OWNERSHIP VEHICLE REGISTRATION VEHICLE REGISTRATION FEES VEHICLES WATER SUPPLY
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101115093023 http://hdl.handle.net/10986/3956

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Summary:	This paper examines international experience with mobilizing funding for both capital and recurrent costs for municipal infrastructure with a view to identifying areas where India could improve its system of financing infrastructure in cities. Based on international data, the analysis shows that there is indeed a wide range of models for funding municipal infrastructure across a group even as relatively homogeneous as the European Union. Although a number of different models operate in countries with very good services, important features of India s municipal finance system stand out. The spending per capita is exceptionally low, even when compared with local governments with few functions. The real estate sector generates meager tax revenues, but transfers from higher levels of government are also meager. Turning to cost recovery models for services, the paper examines international evidence on cost recovery. In practice, a surprisingly large number of countries, including high-income countries, subsidize basic municipal services, particularly in water supply and sanitation. Analysis shows that these subsidies often have perverse distributional effects. Likewise, pricing schemes designed to skew subsidies to low-income households often have unintended distributional effects. Again, evidence from urban India suggests that cost recovery is exceptionally low, not only in absolute terms but relative to the experience of other low and middle-income countries. The paper concludes with a discussion of some of the measures that should be considered for improving finances in Indian cities, including land monetization and capital grants systems designed specifically for reaching secondary cities and towns.

Financing Indian Cities : Opportunities and Constraints in an Nth Best World

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