Financing India’s Urban Infrastructure

Abstract

Cities in India are envisioned as engines of growth but they suffer from severe service shortages. The realisation of the full potential of cities depends crucially on their ability in meeting the challenges of providing urban infrastructure on a sustainable basis. This article, therefore, reviews the current financing options for urban infrastructure and discusses the strategies for pursuing reform agenda needed to strengthen financial health of the municipalities. Given the inadequacies of the municipal financial resources and capacities, this article emphasises on the need for an integrated policy and regulatory environment, in which urban local bodies (ULBs) can enhance their capacities to generate resources from existing sources at their disposal and also can better utilise innovative sources of infrastructure financing. In particular, possible reform actions to improve municipal finance are clarifications in institutional arrangements for service delivery, true local financial autonomy, sustainable finances supported by user charges, restructuring of intergovernmental grants to incentivise reform with greater assistances for smaller cities, encouraging public–private partnerships (PPPs), deepening of the municipal bond market, local capacity building, strengthening regulatory framework of service delivery and public participation.