Local bodies can be allocated a portion of GST collections, says N K Singh

“I stayed away from that (allocation out of GST collections to the third tier) since it is not a function of the Finance Commission but of the GST Council. (However) more thought needs to be given beyond what property tax can do to substantially enhance the resources of the third tier,” Singh said.

“The full adherence to the constitutional requirements of constituting a state finance commission in a timely way, with identical functions as the Central finance commission and alacrity with which they analyse those recommendations, take it to the state legislature and present an action taken report to the state legislature will make a substantial difference to the financial viability to the third tier institutions,” said Singh, who co-chaired the G20 expert group on reforms of multilateral development banks along with former Treasury Secretary of the US, Lawrence Summers.

The panelists included M Govinda Rao, Director of National Institute of Public Finance and Policy; Professor Debolina Kundu from the National Institute of Urban Affairs; Srikanth Viswanathan CEO Janaagraha; D Thara Additional Secretary, Ministry of Housing and Urban Affairs; and Shirish Sankhe, Senior Partner, McKinsey & Company.

Singh emphasised the surging pace of urbanisation, projecting that by 2050, half of the population of India will reside in urban areas. He raised concerns about how this would escalate emissions. “If there is a relationship between the pace of urbanisation and the pace of emission then the first challenge is to reputed institutions systems which can find most optimised solutions between balancing the compulsions of the environment to the compulsions of growth,” Singh said.

Addressing the challenges faced by the third tier of urban areas, he underscored how the amendments that brought in urban local bodies and panchayati raj have still not been implemented “in the full letter and spirit of what are provided in the two constitutional amendments”.

Singh pointed out deficiencies in the regulatory framework for urbanisation, emphasising the need for land reforms, digitization of land records, and transparent market practices. He touched upon the high costs associated with land availability, particularly in infrastructure projects such as highway constructions. According to Singh, addressing these issues is crucial for achieving economic development and investor-friendly policies.

While advocating against super-regulators to preserve states’ authority, Singh stressed on the necessity of coherence and symmetry in the regulatory framework for the entire urban sector. Balancing federalism with investor-friendly policies was highlighted as essential.

He also addressed the challenge of efficiently harnessing private capital for developmental banks. Despite their substantial capitalization, there has been limited success in attracting private funds.

The chairperson drew parallels with Indian bureaucrats and developmental banks. “Risk avoidance than informed risk decision making, risk aversion than informed ability to take risks informs all of these organisations. And I do believe that going forward these institutions will have to change their processes, their procedures and above all their mindsets, not acting like a public sector bank waiting for clients to show up but the ability to innovate private capital in terms of how to make creative use of guarantees, hybrid capital, blended finance, avoiding the principle of cascade finance which will allow these institutions and the governments to harness private capital much more innovatively and creatively than has been the track record,” said Singh.

Professor Debolina Kundu discussed how the number of census towns has increased in the last decade yet how they are still governed under the panchayats, despite being urban settlements. She also pointed out how mayors serve a largely ceremonial role with little decision making powers. Lastly, she discussed how India spends less than 1% of its GDP as compared to 7.4% by Brazil.

Sirish Sankhe discussed how India needs to spend $140 per person per year but instead spends around $20. He also talked about the need for masterplans for transportation and economy for cities and how Indian cities need more coherent metropolitan architecture, while citing the example of Mumbai which has 10 municipal bodies and 1 Panchayati body running the city.

M Govinda Rao explained how state governments need to approve every action of urban local bodies and how even sources of revenue are not under direct control of the municipalities.

Srikanth Viswanathan talked about how state legislatures are often lax and have not kept pace with the growing demands of cities with the amendments of municipality laws. He also pointed out how often urban spending is done on big infrastructure projects or towards direct benefit transfers to the poor, instead of spending it on building core fundamentals such as education and healthcare.

D Thara concluded the panel discussion by discussing the successes of certain cities in urban planning. Citing the example of Gujarat, Thara highlighted how cities such as Surat and Ahmedabad have seen a drastic reduction of slums. She also discussed how urban planning needs political will to be pushed through to implementation and how not all hope is lost for Indian cities to make a turnaround.