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The Brihanmumbai Municipal Corporation (BMC) has presented a budget of 52,619 crore, larger than those of the governments of Himachal Pradesh, Goa and any of the Northeastern states. The impressive size of the budget, however, is eclipsed by the BMC’s failures of governance.

Local news is dominated by stories of municipal officials booked for corruption, wrangling over the construction of vital bridges and roads, cost and time overruns of projects, pothole-riddled roads, illegal felling of trees and such other tales of woe.

The absence of an elected mayor or elected corporators tells its own tale of dysfunction. The fact that 60% of the population lives in slums is taken as a distinctive feature of the city, such as the Arabian Sea or Bollywood celebrities. Yeh hai Mumbai, meri jaan. But should it stay like this?

The fact that Mumbai is India’s commercial capital, flush with money, means the BMC does not have to break a sweat to raise revenue that surpasses many state governments’ budgets. Maharashtra does have other towns – in fact, there are 27 municipal corporations in the state, but, apart from Pune, few show the kind of dynamism that Mumbai possesses.

While the municipal corporation’s job is to run the city well, it is up to the state government to lay the ground for efficient urbanisation as the Indian economy undergoes structural changes and employment increasingly grows faster in industry and services, which are based in towns, than in agriculture.

Releasing rural land to build new towns, planning new towns that are energy-efficient, resilient to climate change, and amenable to coexistence of diverse populations and policing — there are many things that only state governments can do to make urbanisation a pleasant experience and take some of the pressure off existing urban areas.

At the same time, crucial work needs to be done at the national level to improve city infrastructure and urban governance. Local governments in India are understaffed and underfunded compared to those in, say, the OECD countries or China. In India, local governments account for only 3% of total government expenditure. The comparable figures for the US and China are 27% and 51%. Of course, these figures reflect the responsibilities discharged by the different levels of government and the fiscal capacity of each level of government.

In India, local governments raise only 6% of their total resources, with the rest coming from state governments. State governments are supposed to appoint finance commissions to recommend appropriate devolutions to local bodies, and devolve funds according to these recommendations. But this does not quite happen in many states.

A remedy is to amend the 74th Amendment to the Constitution, which made local governments mandatory as a third tier of government, and give them greater fiscal powers. Right now, local governments only earn revenue from property taxes and an inefficient tax on professions, besides sundry tolls that discourage visitors.

Municipal bonds are a vital source of funding for urban development in the US. These hardly exist in India because municipalities lack the fiscal capacity to service the debt raised by such bonds. Granted, local governments do not use property tax half as efficiently as they could. That is related to the poor quality of services they render and the taxpayer’s reluctance to simply hand over money in return for very little.

If the quality of city government were to improve, citizens would be more willing to pay tax. This is no abstract chicken-or-egg problem. The future of India lies in its cities. If that future is to be bright, rather than scarred, urban governance and urban finances have to improve.

Empowered city governments will play a major role in improving the quality of urban governance. There's been a failure to institute elected bodies in new urbanisations such as Noida or Greater Noida – vital parts of the National Capital Region. In several countries, successful mayors of large cities go on to become heads of state, with Turkey’s Erdogan and Indonesia’s Joko Widodo serving as prime examples along with Boris Johnson, the former mayor of London, who is now one of the many ex-prime ministers of Britain.

As India continues to urbanise, how cities are run will determine the quality of civic life and economic vitality. BMC offers an important negative example. The rest of the country must learn from it. We could, perhaps, start with New Delhi, where the municipal corporation has been unable to elect a mayor in spite of one party securing a clear majority in the civic elections.

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