When even a rich city like Mumbai is starved of funds


Acute fiscal stress is building in India’s states and municipalities, including the urban authority that manages the richest city, Mumbai. This matters. Local bodies hold the key to lasting solutions for a broader crisis of financial resources.


The federal government’s chronic deficits dominate discussions about India’s precarious public finances. It’s time to flip this New Delhi-centric approach. State government accounts deserve scrutiny because they collectively spend 36% more than the federal administration. Yet their fundraising abilities are limited. Of the Rs 24 lakh crore ($340 billion) that Prime Minister Narendra Modi’s team hopes to pull in via taxes in the coming fiscal year, less than a third is intended for the states. A 20% jump looks impressive only because this year’s transfer saw a 14% squeeze from the previous.



Formerly known as Bombay, the capital of the western state of Maharashtra faces a further crunch. Centered on seven Arabian Sea islands that Portuguese colonizers handed to the British in 1662, modern Mumbai has expanded into independent India’s pulsating trading and financial center, a cosmopolitan agglomeration of 26 million people — twice as populous as business hubs like Hong Kong and Singapore combined.


The birthplace of Bollywood boasts the country’s priciest real estate, but the property market is toast, in part because a shadow-banking meltdown choked developers’ access to finance. With unsold homes piling up, Mumbai can’t earn much from homeowners or builders. Up to 34% of the municipality’s recently announced 334 billion-rupee annual budget will rely on compensation. This was offered in 2017 by the federal government to get state and municipalities to agree to scrap inefficient indirect taxes — in Mumbai’s case, a levy on merchandise entering the city for sale — in favor of a nationwide goods and services tax.


GST was a major reform, but awkwardly designed and poorly implemented. As Mumbai real-estate analyst Vishal Bhargava notes, the city’s compensation deal ends in 2022. Its revenue will fall to what it was a decade ago, only facing higher costs. The authority is already dipping into reserves to meet pension obligations; a further income shock will be a disaster.


Every year, Mumbai’s creaking infrastructure faces a huge risk from flash floods. Yet such are the funding constraints that a city of tycoons, bankers and movie stars — who live alongside masses huddled in shantytowns — can allocate only 9 billion rupees of capital expenditure on storm drains, a fifth of what the civic body will spend on employee pensions.


India’s richest metropolis opens a window on the crippling lack of basic services in smaller cities, towns and villages where 1.3 billion people live. New Delhi, the capital, is at least contained in a mini-state, which gives the city access to a more diversified resource pool, such as taxes on petroleum products. But New Delhi’s air quality is foul. Chennai, the capital of Tamil Nadu, is running out of water. Software powerhouse Bangalore, which has lost its entire greenery to urbanization, punishes commuters with the worst traffic congestion in the world.


At 70% of GDP, India’s overall government debt — at all levels — is too high for an investment-grade sovereign. Without bumping up local capital spending, people’s incomes and their ability to pay taxes and fees won’t rise fast enough to reduce national debt.


Weak national finances will leave India unprepared to deal with climate change and epidemics. The coronavirus isn’t a big headache for India, at least not yet. It’s the next outbreak that planners must worry about. Setting aside more money for drains, sewage management and hospitals will better protect citizens and economic assets. The money circulating in the economy because of municipal-level spending will ease India’s fiscal crisis.


Will it happen? Take Mumbai again. Shiv Sena, the homegrown right-wing party in control of the municipal corporation since 1985, was a long-time ally of Modi’s Bharatiya Janata Party until it broke ranks last year. It now leads a coalition controlling the entire state. The Shiv Sena leader, Uddhav Thackeray, has hinted at pulling the plug on a Japanese-funded high-speed train link between Mumbai and Ahmedabad in Modi’s home state, Gujarat.


For India’s fiscal balance to regain its footing, the economics of public spending will have to become more local.



译文来源:三泰虎      http://www.santaihu.com/49314.html     译者:Joyceliu


Center and the States' political rule.. are vying with each other to grab fund-streams..? Center is playing big-brother.. by way of over 100 schemes - many didn't clinch - uniform scheme for all states is not healthy - as each state is unique in problems & potentials..? Wish the central rule - respects federal co-op spirit better.



Padamnoor Pradeep

Corruption is the biggest problem for everyone in India as it robs all of basic civic facilities. But, as far as funding is concerned, corporates/self employed (as it's tax deductible!) have to bear higher share of local taxes such as property, water and Sewerage as residents in gated communities bear. Whoever has income tax deduction has to pay higher share of local taxes!



DM Bhanap

Mumbai has been a cauldron of people from all states and union territories of India that came here in hoards to seek ever-growing opportunitiesin business , finance, education, art music show business, etc. they not only contributed to its development but also thrived here to realizetheir dreams and eventually became Mumbaikars. It is indeed sad that it is starved of funds because of politicians. mr.Manmohansing wanted it to be like Shanghai but could not save it from its woes. Mumbaikars have known to survive against many crises successfully in the past and hopefully this crisis will blow- over soon by detemination and resolve of mumbaikars



Melman Const

Politicians and govt employees are interested in kick back. They are not interested in city development. This is Indian mentality.



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Superman Cid

In all these Kerala is the worst.



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