India’s 16th Finance Commission should prioritize urbanization

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₹4.36 trillion between the 13th and 15th FCs. Against the backdrop of Vocal for Local, Lifestyle For Environment (LiFE) and Jan Bhagidari espoused by the prime minister for greater citizen participation in governance, the 16th FC’s potential to transform the governance in general and public finance in particular of India’s cities is immense.

There has been a significant increase in city funding through centrally sponsored schemes, with a 500% increase in allocations between 2009-10 and 2020-21. The allocations and recommendations of the 15th FC have raised the bar for the 16th FC for cities.

Raising the share of funding for cities (within local government share) from 30% to 35%, giving only performance-based grants to metropolitan cities, mandating the publication of audited annual accounts on Cityfinance.in, setting base rates and growth rates in property tax as basic eligibility conditions, and pushing for ‘whole of government’ accounting by aligning ULB and state accounts were all progressive recommendations. While we have been brought up on the adage “India lives in its villages," we should be aware that India is urbanizing at a rapid pace, and over half of us will be living in urban areas by 2050.

Despite the significant increase in funding for cities, city dwellers are gasping due to challenges of flooding, air pollution, availability of quality housing, sanitation, water supply and public transport, among others. India’s major cities face challenges that rival those of mid-sized countries in providing for their residents.

The country needs to prioritize urbanization as a distinct development agenda to accomplish its goal of becoming a developed economy by 2047. Here we offer specific suggestions for raising the