Reinvigorating Local Governance in India

The Reserve Bank of India’s report on municipal corporation finances highlights a pressing issue in India’s urbanization trajectory. Despite contributing 60% to the country’s GDP and projected to house half of the population by 2050, municipal corporations account for a mere 0.6% of GDP in revenue receipts.

Heavy Reliance on Grants:
Municipal corporations are overly dependent on grants while underutilizing key revenue streams like property taxes.

Resource Inequalities:
A significant disparity exists, with just 10 municipal corporations generating 60% of total revenues, leaving smaller local bodies resource-starved.

Need for Devolution of the 3Fs:
The lack of comprehensive devolution of Functions, Finances, and Functionaries hampers the effectiveness of grassroots governance.

Understanding the Current Structure of Local Governance in India

Overview

Local bodies are self-governing institutions tasked with planning, development, and administration at the grassroots level. They operate in two main categories:

• Rural areas: Governed by Panchayats.
• Urban areas: Governed by Municipalities.

These institutions serve as regulators, service providers, welfare agents, and facilitators of development, playing a crucial role in delivering infrastructure and public services.

Constitutional Framework

• Local governance falls under the State List (List II) in the Seventh Schedule of the Indian Constitution.
• Article 243G: Enables the devolution of powers to local bodies, allowing them to assume significant responsibilities for delivering essential services and infrastructure.

Evolution of Local Bodies

1. Historical Roots
   • Local governance dates back to British rule.
   • Mahatma Gandhi’s vision of Gram Swaraj emphasized self-reliant villages as the foundation of Indian democracy.
2. Key Milestones
   • 1952 Community Development Programme: An early initiative to promote rural development failed due to inadequate public participation.
   • 1957 Balwantrai Mehta Report: Advocated for village-level organizations to implement government schemes effectively.
   • 1977 Ashok Mehta Committee: Proposed empowering Panchayats, leading to “Second Generation Panchayats.”
   • 73rd Constitutional Amendment (1992): Institutionalized Panchayati Raj as the third tier of governance. It granted Panchayats powers to plan and execute economic and social development activities across 29 subjects listed in the Eleventh Schedule.

Funding Sources for Panchayats

1. Local Body Grants: Allocated based on recommendations from the Central Finance Commission.
2. Centrally Sponsored Schemes: Direct funding for specific development programs.
3. State Government Allocations: Determined by State Finance Commissions.

This framework underscores the critical role local bodies play in India’s governance system, though further fiscal and functional empowerment is required for them to operate more effectively.

The Role of Local Bodies in Strengthening Development in India

Financial Decentralization and Resource Management

• The 15th Finance Commission allocated ₹4.36 lakh crore to local bodies for 2021-26, significantly boosting their financial autonomy.
• Municipal corporations are adopting innovative financing strategies, such as Indore Municipal Corporation raising ₹244 crore through green bonds in 2022 to fund solar projects.
• Reforms in property tax collection, like Bengaluru’s GIS-based system introduced in 2023, have shown potential to enhance revenue generation.

Urban Planning and Infrastructure Development

• Local bodies are leading transformation under programs like the Smart Cities Mission, with 100 cities implementing projects worth ₹2.05 lakh crore.
• Urban planning is becoming more climate-resilient, exemplified by Surat’s flood management system.
• Sustainable development initiatives, such as Indore’s waste-to-energy plant, showcase the innovative capabilities of local bodies.

Social Welfare and Public Service Delivery

• Gram Panchayats played a pivotal role in implementing MGNREGA, generating 293.70 crore person-days of employment in FY 2022-23.
• Urban local bodies were instrumental during the Covid-19 pandemic, managing vaccination centers and health infrastructure.
• Integration of schemes like the National Rural Livelihood Mission has empowered rural communities, forming over 90 lakh Self-Help Groups (SHGs).

Environmental Sustainability and Climate Action

• Urban local bodies are leading climate initiatives, such as Diu becoming India’s first solar city, achieving 100% daytime solar power.
• Municipalities are enforcing green infrastructure policies, like Hyderabad’s mandate for rainwater harvesting in new constructions.

Participatory Democracy and Citizen Engagement

• 50% reservation for women in local bodies has enhanced their participation, with women now constituting 45.6% of total Panchayati Raj Institution representatives (RBI report).
• Initiatives like Pune’s participatory budgeting and Chennai’s Area Sabha system empower citizens to participate in local decision-making processes.
• Gram Sabhas have seen impressive participation, with 85% attendance in key decisions.

Economic Development and Livelihood Generation

• Under the PM SVANidhi scheme, municipalities have facilitated 65.75 lakh loans, benefiting over 50 lakh street vendors.
• Programs like Common Services Centers (CSC) have launched the Yogyata mobile app, offering vocational education and skill development opportunities to youth.
• Local bodies play a critical role in promoting inclusive development, sustainable practices, and participatory governance, driving India’s growth at the grassroots level

Challenges Faced by Local Bodies in India

Inadequate Financial Resources

• Local bodies face severe financial dependency, relying heavily on delayed or conditional state and central transfers.
• According to the RBI’s 2022 report, urban local bodies (ULBs) generated only 0.6% of GDP as own-source revenue (OSR), far below Brazil’s 7%.
• Limited capacity to levy and collect taxes exacerbates financial constraints.
• While the 15th Finance Commission allocated ₹4.36 lakh crore for 2021-26, timely utilization of funds remains a persistent issue.
• State Finance Commissions are often not constituted on time, hampering effective fiscal planning and resource distribution.

Functional Challenges and Political Interference

• Frequent political interference disrupts local bodies’ autonomy and accountability.
• State governments often dissolve elected councils prematurely or delay local elections, as witnessed in Maharashtra (2023), where all 27 municipal corporations operated without elected bodies.
• Party politics frequently influences local decision-making, prioritizing political agendas over public welfare.
• For instance, the 2023 dismissal of Belagavi Municipal Corporation by Karnataka’s government highlighted the negative impact of political interference.
• Such disruptions weaken local governance and delay essential reforms, such as waste management and infrastructure development.

Capacity Building and Human Resource Deficiency

• Local bodies face acute understaffing, lack of technical expertise, and inadequate training, impacting service delivery and project implementation.
• 35% of municipal corporation positions remain vacant (2023 study).
• The absence of specialized departments further limits their ability to adopt modern technology for efficient governance and planning.

Urbanization and Infrastructure Stress

• Rapid urbanization strains local bodies’ capacity to deliver essential services like housing, water, and sanitation.
• Slum households constitute 17% of the urban population, while 11 million homes remain vacant across urban India (Observer Research Foundation).
• Events like Bengaluru’s 2022 floods, caused by drainage encroachment, and chronic water shortages in Mumbai slums underscore poor urban planning and infrastructure management.
• Without proactive planning, local bodies struggle to meet the growing demands of urban populations.

Environmental Management Challenges

• Local bodies face critical challenges in waste and pollution management due to gaps in compliance and infrastructure.
• The Ministry of Environment estimates that only 75-80% of municipal waste is collected, and merely 22-28% is processed or treated, leading to growing landfill sites like Delhi’s Ghazipur landfill.
• Poor waste management exacerbates air pollution, as seen with stubble burning in Punjab and Haryana, highlighting weak enforcement at the local level.

Community Participation and Accountability

• Despite constitutional provisions, community participation in governance remains low, weakening accountability.
• As of January 2023, only 8 out of 16 states with notified ward committee rules reported active committees.
• Mechanisms like Gram Sabhas are underutilized, and provisions under the Biological Diversity (Amendment) Act, 2023 have reduced their powers, leading to a top-down approach in decision-making.

Coordination with Multiple Agencies

• Local bodies struggle with overlapping jurisdictions and poor coordination with parastatal agencies or Special Purpose Vehicles (SPVs).
• Fragmented institutional frameworks lead to inefficiencies and delays in project implementation.
• For example, the Delhi Development Authority (DDA) and Municipal Corporation of Delhi (MCD) often face challenges in coordinating urban planning, land acquisition, and infrastructure projects.

Local bodies require urgent reforms to overcome these challenges and play a more effective role in driving grassroots development, urban planning, and environmental sustainability.

Strategies to Empower Local Bodies in India

1. Strengthening the Legal Framework

State municipal legislations must be revised to provide local bodies with greater autonomy and authority.

Implement the L.M. Singhvi Committee’s recommendation to establish dedicated tribunals for quick resolution of local body disputes.

2. Financial Empowerment

Establish a comprehensive Municipal Finance Management System integrating digital platforms with modern property tax reforms like GIS-based assessments and market-linked rates.

Expand municipal bond markets and enable direct borrowing through credit rating mechanisms to create new funding opportunities.

3. Administrative Reforms

Establish a specialized Urban Administrative Service Cadre with permanent technical staff, including urban planners, engineers, and financial experts, as recommended by the GVK Rao Committee.

Introduce performance-based assessments and promotion systems for staff to ensure accountability and efficiency.

4. Enhancing Planning Capabilities

Provide local bodies with planning autonomy within state frameworks, supported by mandatory, regularly updated long-term master plans.

Empower Metropolitan Planning Committees (MPCs) with real authority to coordinate regional development effectively.

5. Technology Integration

Develop comprehensive digital platforms integrating all municipal services with real-time monitoring of service delivery and revenue collection.

Implement smart infrastructure management systems, including IoT sensors and automated systems, for efficient asset management.

6. Promoting Participatory Governance

Strengthen ward committees by granting them real powers and budgets, realizing the L.M. Singhvi Committee’s vision of grassroots democracy.

Mandate participatory budgeting mechanisms with fixed allocations for ward-level decisions, incorporating blockchain technology for transparent financial tracking.

7. Environmental Management

Mandate climate action plans for all urban local bodies, supported by dedicated funding and clear implementation guidelines.

Standardize integrated waste management systems, including waste-to-energy solutions, across all cities.

Strengthening local governance in India necessitates enhanced fiscal autonomy, comprehensive administrative reforms, and the establishment of robust legal frameworks. Empowering local bodies through democratic decentralization is key to fostering effective development in both urban and rural areas. Additionally, active citizen participation and the integration of advanced technologies can significantly enhance transparency, accountability, and efficiency in governance.

The End of the Blog: Reinvigorating Local Governance in India