Report on Municipal Finances

In News

  • Recently, the study titled “Report on municipal finances” was published by the RBI.

Report highlights

  • Budgetary allocations & fund transfers:
    • The combined budget of all the municipal corporations in India is much smaller than that of the Central and State governments.
    • The report reveals how municipal bodies are increasingly dependent on fund transfers from the State and the Centre, while their revenue earning capacity is limited. 
  • Revenue raising of municipal corporations:
    • Their revenue raising powers are curtailed according to the study. 
    • The municipal corporations don’t borrow much, leaving them gasping for funds.
    • The share of own revenue (both tax and non-tax) in the total revenue of urban local bodies in India has declined, while that of government transfers has increased.
      • Spendings:
        • About 70% of it gets spent on salaries, pensions and administrative expenses with the rest left for capital expenditure. 
  • Tax earnings of municipal corporations:
    • Taxes earned by municipal corporations in India are grossly inadequate to meet their expenditure needs
    • In India, the own tax revenue of municipal corporations, comprising property tax, water tax, toll tax and other local taxes, formed 31-34% of the total revenue in the FY18-FY20 period.
      • This share was low compared to many other countries and it also declined over time. 
  • State-wise variations:
    • Large variations can be observed if the municipal corporations’ own tax revenue is sliced State-wise. 
    • The own tax revenue of municipal corporations as a share of the State’s GDP in 2017-18 crossed the 1% mark in Delhi, Gujarat, Chandigarh, Maharashtra and Chhattisgarh, while it was 0.1% or less in Karnataka, Goa, Assam and Sikkim.
  • Dependence on property taxes:
    • Another major issue with the municipal corporations’ revenue raising capabilities was their dependence on property taxes
    • In 2017-18, the property taxes formed over 40% of the municipal corporations’ own tax revenue
    • Despite such dominance, property tax collection in India was much lower compared to OECD countries due to undervaluation, and poor administration, the report argues.

About  Urban local bodies (ULBs) in India

  • Establishment of ULBs in India:
    • The 74th Constitution Amendment Act was passed in 1992 mandating the setting up and devolution of powers to urban local bodies (ULBs) as the lowest unit of governance in cities and towns. 
  • Types of ULBs:
    • There are several types of Urban Local bodies in India such as Municipal Corporation, Municipality, Notified Area Committee, Town Area Committee, Special Purpose Agency, Township, Port Trust, Cantonment Board etc.
  • Functions: 
    • These local bodies are entrusted with functions related to welfare, public health and safety, infrastructural works, and other activities related to city development.
  • Fiscal empowerment:
    • Constitutional provisions were made for ULBs’ fiscal empowerment. 
    • The ULBs’ key revenue sources are taxes, fees, fines and charges, and transfers from Central and State governments, which are known as inter-governmental transfers (IGTs). 
    • The share of own revenue (including revenue from taxes on property and advertisements, and non-tax revenue from user charges and fees from building permissions and trade licensing) to total revenue is an important indicator of ULBs’ fiscal health and autonomy. 

Challenges faced by ULBs 

  • Fiscal challenges:
    • Three decades since, growing fiscal deficitsconstraints in tax base expansion, and weakening of institutional mechanisms that enable resource mobilisation remain challenges.
      • Revenue losses after the implementation of the Goods and Services Tax (GST) and the pandemic have exacerbated the situation.
    • Lack of finances:
      • The transfer of duties from the national and subnational governments to local governments has not always been accompanied by a corresponding transfer of financial authority.
      • The generated funds are mostly spent on revenue expenditure, leaving a much smaller pie for capacity building.
    • Over-reliance on property taxes:
      • Over-reliance on property taxes has prevented local governments from fully utilising other revenue streams such as trade permits, entertainment taxes, mobile tower taxes, solid waste user fees, water fees, and value capture finance.  
      • Property taxes are also not efficiently collected. 
  • Other:
    • ULBs across the country lack autonomy in city management and several city-level functions are managed by parastatals (managed by and accountable to the state).  
    • Municipal administration in India suffers from staffing issues which leads to a failure in delivering basic urban services.  
    • Other concerns include
      • Overstaffing of untrained manpower, 
      • Shortage of qualified technical staff and managerial supervisors, and 
      • Unwillingness to innovate in methods for service delivery. 

Suggestions & Way ahead

  • The scale of municipal finances in India is undoubtedly inadequate. A ULB’s own revenue resources are far below the estimated potential.
  • As noted in the Sustainable Development Goal (SDG) 11: Sustainable Cities and Communities, an effective city government is essential for sustainable development.
    • Tapping into property taxes, other land-based resources and user charges are all ways to improve the revenue of a ULB. 
    • inter-governmental transfers (IGTs) assume significance in the fiscal composition of ULBs, and a stable support from Central and State governments is crucial till ULBs improve their own revenues. 
    • Measures need to be made to also cover operations and maintenance expenses of a ULB for better infrastructure and service.

India-UK – Young Professionals Scheme

In News

  • The governments of India and the U.K. recently marked Pravasi Bharatiya Divas on January 9, 2023 by initiating the Young Professionals Scheme.

More about the news

  • About:
    • The Young Professionals Scheme was conceived as part of an India-U.K. The Migration and Mobility MoU signed in May 2021, was announced in November at the G20 summit in Bali.
  • Key highlights of the scheme:
    • The scheme will permit degree-holding citizens aged between 18 and 30 to live and work in each other’s countries for a period of two years.
      • They would be able to either work, study, or visit, for two years. 
      • The scheme will run for a period of three years initially.
    • The scheme allows for exchange visas for up to 3,000 individuals per year.
    • It isn’t even necessary for an applicant to have a job in hand when he/she applies for the visa.
      • So, the successful candidates could look for a job, educational or cultural opportunity once they arrived in their host country. Or they could just visit.
  • Challenges:
    • The signing of the agreement belies more complex issues around the movement of persons across borders.
      • Part of the Migration and Mobility agreement of 2021 seeks to address the return of illegal migrants to their home countries.
Migration and Mobility agreement of 2021An agreement was made amongst the UK and India known as the ‘Migration and Mobility Partnership’ agreement on 4 May 2021. Through this agreement, young, professional Indian, and British citizens from the ages of 18 to 30 will be able to live and work in both countries for a period no longer than two years.Aim:One of the aims of this agreement is to enable the UK as well as Indian nationals to strengthen their skills which they can implement in their countries of nationality. It also aims to address the issues of illegal migration from India to the UK by accelerating the removal of migrants who do not have the right to be here.Significance:Both countries have a series of immigration and homeland security issues. This agreement means that there will be constant communication between the two governments to allow them to stay on top of these issues.

India-UK Relations

  • About:
    • UK-India relationship is rooted in India’s colonial history with the British and the relationship shared by both countries even after India’s independence. 
    • The bilateral relationship was upgraded to a strategic partnership in 2004.
  • Political:
    • They share a modern partnership which was upgraded to a strategic partnership in 2004.
    • The UK supports India’s proposal for permanent membership of the UNSC and is also an important interlocutor for India on global platforms. 
  • Economic Engagements:
    • Trade: 
      • UK is among India’s major trading partners and as per trade statistics of MoC&I, India’s trade with the UK in 2017-2018 was US $14.497 billion.
    • Investment: 
      • UK is the 4th largest inward investor in India, after Mauritius, Singapore and Japan with a cumulative equity investment of US $26.09 billion (April 2000-June 2018), accounting for around 7% of all foreign direct investment into India. India continued to be the third largest investor in the UK and emerged as the second largest international job creator with Indian companies having created over 110,000 jobs in the UK. 
  • Defence:
    • In 2015, the two countries agreed to elevate their Defence relationship by establishing capability partnerships in strategic areas. 
    • The institutionalized dialogue to discuss defense cooperation viz. Defence Consultative Group Meeting, is held annually at Defence Secretary level. 
    • Ajeya Warrior (army-to-army biennial exercise), the Konakan (joint navy-to-navy annual exercise) and the Indradhanush (joint air-to-air exercise) happen between India and UK.
  • Education:
    • Over the last 10 years, the relationship has grown substantially with the introduction of bilateral mechanisms such as the India-UK Education Forum, UK-India Education and Research Initiative (UKIERI), Joint Working Group on Education, Newton-Bhabha Fund and Scholarship schemes. 
  • Science and Technology:
    • Joint investment in UK-India research has grown from less than £1 million in 2008 to over £200 million. 
    • A India-UK Clean Energy R&D Centre with a focus on solar energy storage and a collaborative R&D programme in energy efficient building materials were announced. 
    • New research partnerships worth £80 million including a new Joint Strategic group on Antimicrobial Resistance (AMR) with a joint investment of up to £13 million have also been established. 
  • Cultural Linkages: 
    • Cultural linkages between India and UK are deep and extensive, arising out of shared history between the two countries. 
    • There has been a gradual mainstreaming of Indian culture and absorption of Indian cuisine, cinema, languages, religion, philosophy, performing arts, etc. 
    • 2017 was celebrated as the India-UK year of Culture to mark the 70th anniversary of Indian independence. 
  • Indian Diaspora:
    • The Indian Diaspora in the UK is one of the largest ethnic minority communities in the country.
    • As per the 2011 census, approximately 1.5 million people of Indian origin live in the UK equating to almost 1.8 percent of the population and contribute 6% of the country’s GDP. 
  • Roadmap 2030:
    • The “Roadmap 2030” for India-UK future relations was launched during India-UK Virtual Summit for-
      • Revitalised and dynamic connections between people; 
      • Re-energised trade, investment and technological collaboration that improves the lives and livelihoods of the citizens; 
      • Enhanced defence and security cooperation that brings a more secure Indian Ocean Region and Indo-Pacific and 
      • India-UK leadership in climate, clean energy and health that acts as a global force for good.

India Australia Economic Cooperation and Trade Agreement (IndAusECTA)

In News

  • Recently, the IndAusECTA Agreement, which was signed last year, has come into force after Ratification and Exchange of Written Instruments.

Major Areas of IndAusECTA

  • Trade in Goods
  • Trade in Services
  • Rules of Origin
  • Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary (SPS) measures
  • Customs Procedures and Trade Facilitation
  • Trade Remedies
  • Legal & institutional Issues
  • Movement of Natural Persons

Current Trade trends between India and Australia

  • Imports:
    • India’s imports from Australia amount to 17 US $ billion India’s imports from Australia are primarily (96%) raw materials & intermediate goods.  
    • They are highly concentrated in Coal (74% of Australia’s exports to India) out of which 71.4% is coking coal. 
  • Exports:
    • India’s exports to Australia amount to 10.5 US $ billion. 
    • India’s exports to Australia are broad-based and dominated by finished products (consumer goods). 
    • India also spends $ 4 bn approx. each year on education of students in Australia.

Benefits for India

  • Benefits under Trade in Goods:
    • Indian goods on all tariff lines to get access to the Australian market with zero customs duty (currently subjected to 5% import duty by Australia). 
    • Immediate duty-free access covers all labour-intensive sectors such as Textiles and Apparel, Agricultural and Fish products, Leather, Footwear, Furniture, many Engineering Products, Jewelry and select Pharmaceuticals. 
    • Cheaper Raw Materials, Faster Approval for Medicines
    • Immediate Duty-Free Access is projected to potentially create 10 lakh jobs in India and additional exports of $ 10 bn from India to Australia in the next five years.
    • India has offered concessions on Tariff lines of export interest to Australia like Coking coal and Thermal coal, Wines, Agricultural products – 7 of them with TRQ (Cotton, Almonds shelled and in shell, Mandarin, Oranges, Lentils, Pear), Metals (Aluminium, Copper, Nickel, Iron & Steel) and Minerals (Manganese Ore, Calcined Alumina). 
    • Exceptions: Many sensitive products such as milk and other dairy products, wheat, sugar, iron ore, apple, walnuts and others, have been kept in India’s Exclusion list.
  • Benefits under Trade in Services:
    • Australia has committed its schedule in the negative list and has also made wide-ranging commitments in around 135 sub-sectors with Most Favoured Nation (MFN) status in around 120 sub-sectors.  
    • India has for the first time agreed to Negative listing after 5 years of coming into force of the Agreement.
    • India is also making a commitment to Australia in around 103 Service Sub-Sectors with Most Favoured Nation status in around 31 Service Sub-sectors for the first time. 
    • The Agreement opens avenues for investment in computer related services, telecom, construction, health & environmental services. 
    • More than 1 lakh Indian students in Australia will benefit from post-study work visas (18 months – 4 years).
    • The Agreement provides for an Annual Quota of 1,800 for Yoga teachers and Indian Chefs. 
    • It makes an arrangement for Work and Holiday Visas for young professionals.
    • Commitments have also been made to pursue Mutual Recognition Agreements (MRAs) in professional services in 12 Months.
  • Protective Features to guard against Unintended Consequences:
    • The #IndAusECTA also has certain ‘protective features’ aimed at guarding both countries against unintended consequences on trade.
    • Stringent Rules of Origin –
      • Value Addition of 35% + Change in Tariff Subheading (CTSH)
      • In calculation of Value Addition, 2 different values agreed to (35% or 45%) depending on method of calculation (based on whether profit is excluded or included)
    • Product Specific Rules negotiated for 807 products
      • Requirement of ‘melt and pour’ for iron & steel products included in the Product Specific Rules for these products.
    • Strict Operational Customs Procedures
      • A specific clause included to ensure only items made in Australia count for value addition, no other country products
      • A Bilateral Safeguard Mechanism will be available for 14 years in case of surge in imports:
    • A special clause on Review has been agreed upon to enable either country to request a Review for parts of the Agreement which may be a cause of concern, after 15 years
      • Review compulsory if requested (it shall happen)
      • Must be completed in 6 months
  • End to Double Taxation:
    • A provision in the Double Taxation Avoidance Agreement (DTAA) was used to tax this remittance.
    • However, the Agreement has removed the discrepancies with regard to use of DTAA for taxation of Indian firm royalties, fees and charges.
    • Australia has no domestic provision for charging tax on royalties, fees and charges by firms sending these to parent companies. 
  • Boost to Economy:
    • Exports are expected to increase by 10 billion by 2026-27 with a creation of approximately 10 lakh jobs. 
    • The total bilateral trade is expected to cross US $ 45-50 billion by 2035. 
    • The coming into force of the India Australia ECTA is expected to consolidate and help in the growth of market share of Indian products and services. 

Way Ahead

  • There is a lot of potential for exporting finished goods to Australia, since they hardly manufacture anything, they are largely a raw material and intermediate producing country. 
  • India can get cheaper raw materials which will not only make India more competitive globally but also enable it to serve Indian consumers better; enabling it to provide more quality goods at more affordable prices
  • Ind – Aus ECTA brings together two major economies of the world, – India the 5th largest economy and Australia the 14th largest economy. 
  • The trade between the two countries is hugely complementary, this offers opportunities on both sides and will pave the way for a win-win solution for both India and Australia.

Indian Diaspora

In News

  • Recently, the Prime Minister of India inaugurated the 17th Pravasi Bharatiya Divas convention.

About Pravasi Bharatiya Divas (PBD)

  • Origin:
    • To mark this day, the tradition of celebrating Pravasi Bharatiya Divas (PBD) started in 2003. 
    • 1st PBD Convention was organized on 9 January 2003 to mark the contribution of the overseas Indian community to the development of India.
    • Since 2015, under a revised format, PBD Convention has been organized once every 2 years (biennial).
  • Significance:
    • 9 January commemorates the return of Mahatma Gandhi from South Africa to India in 1915. 
    • It is celebrated grandly to strengthen the engagement of the Government of India with the overseas Indian community.
  • Concerns with Celebrations:
    • Low/semi-skilled and blue collar workers may not find a place or feel comfortable to participate in the said celebration as the general profile of participants is seen to be of very high level. 
    • The participation and involvement should be more broad-based, accommodating the vulnerable sections of the diaspora community too.
  • Themes:
    • 17th PBD- “Diaspora: Reliable Partners for India’s Progress in Amrit Kaal”.
    • 16th PBD- “Contributing to Atma Nirbhar Bharat ”.

Indian Diaspora

  • Meaning:
    • The term diaspora traces its roots to the Greek diaspeiro, which means dispersion.
  • Historical Background:
    • The Indian diaspora has grown manifold since the first batch of Indians were taken to counties in the east pacific and the Caribbean islands under the ‘Girmitiya’ arrangement as indentured labourers.
    • The 19th and early 20th centuries saw thousands of Indians shipped to those countries to work on plantations in British colonies, which were reeling under a labour crisis due to the abolition of slavery in 1833-34.
    • 2023 marks the 150th year of the first such journey of Indians to Suriname.
    • As part of the second wave of migration, nearly 20 lakh Indians went to Singapore and Malaysia to work in farms. 
    • The third and fourth wave saw professionals heading to western countries and workers going to the Gulf and west Asian countries in the wake of the oil boom.
Various ClassificationsNon-Resident Indians (NRI): NRIs are Indians who are residents of foreign countries.To qualify as a resident Indian, an individual should have spent 182 days or more of a financial year in India, or stayed in India for 60 days or more in the year and for a period of 365 days or more in the 4 years preceding the relevant financial yearPersons of Indian Origin (PIOs): The PIO category was abolished in 2015 and merged with the OCI category. However, existing PIO cards are valid till December 31, 2023, by which the holders of these cards have to obtain OCI cards.PIO refers to a foreign citizen (except a national of Pakistan, Afghanistan Bangladesh, China, Iran, Bhutan, Sri Lanka and Nepal) who at any time held an Indian passport, or who or either of their parents/ grandparents/great grandparents was born and permanently resided in India as defined in Government of India Act, 1935, or who is a spouse of a citizen of India or a PIO.Overseas Citizens of India (OCIs): A separate category of OCI was carved out in 2006. An OCI card was given to a foreign national who was eligible to be a citizen of India on January 26, 1950, was a citizen of India on or at any time after January 26, 1950, or belonged to a territory that became part of India after August 15, 1947. Minor children of such individuals, except those who were a citizen of Pakistan or Bangladesh, were also eligible for OCI cards.
  • Numbers:
    • As on December 31, 2021, there were 4.7 crore Indians living overseas. 
    • The number includes NRIs, PIOs, OCIs, and students. Excluding students, the number stands at 3.22 crore, including 1.87 crore PIOs and 1.35 crore NRIs.
    • According to the World Migration Report, prepared by the International Organisation for Migration under the United Nations, India has the largest emigrant population in the world, making it the top origin country globally, followed by Mexico, Russian and China.
  • Geographical spread:
    • The geographical spread of the Indian diaspora is vast. 
    • The countries with over 10 lakh overseas Indians include United States of America (44 lakh), United Kingdom (17.6 lakh), United Arab Emirates (34 lakh), Sri Lanka (16 lakh), South Africa (15.6 lakh), Saudi Arabia (26 lakh), Myanmar (20 lakh), Malaysia (29.8 lakh), Kuwait (10.2 lakh) and Canada (16.8 lakh).
  • Remittances:
    • As per the latest World Bank Migration and Development Brief 2022, “For the first time a single country, India, is on track to receive more than $100 billion in yearly remittances.”
    • The World Migration Report notes that India, China, Mexico, the Philippines and Egypt are (in descending order) among the top five remittance recipient countries, “although India and China were well above the rest”. 
  • Involvement in politics:
    • The vocal political positions taken by a section of the Indian diaspora, particularly in the US and the UK, is a fairly recent phenomenon.
      • For instance, the Hindu American Foundation, a Hindu advocacy group based in the US, was set up in 2003, the same year the Pravasi Bharatiya Convention was launched. 
    • Many prominent overseas Indians play an active role in organising global meetings.


  • Indians living overseas are “brand ambassadors” of the country on foreign soil.
  • Overseas Indians can project the truth about India to the world in a credible and effective manner and counter “propaganda”.

Joshimath Land Subsidence

In News

  • The subsidence (ground sinking) in Joshimath (at an altitude of over 6,000 feet) in Uttarakhand has delivered stern warning for the State’s administration.

Key Points

  • About Joshimath Sinking:
    • In 2021, Joshimath was struck in the aftermath of a deluge in the Rishiganga and Dhauliganga rivers. 
    • This event is what experts are now suggesting likely triggered the current “sinking and cracking”. 
    • Later that year, Joshimath was battered by a torrential downpour of over 190 mm. 
    • Following the rains, residents noticed a movement in the cracks and more frighteningly, new cracks as well, with several cropping up inside homes.
  • Impacts:
    • At least 66 families have fled the town while 561 houses have reported cracks. 
    • A government official said that over 3000 people have been affected so far.
Land SubsidenceAccording to the National Oceanic and Atmospheric Administration (NOAA), subsidence is the “sinking of the ground because of underground material movement”. It can happen for a host of reasons, man-made or natural, such as the removal of water, oil, or natural resources, along with mining activities. Earthquakes, soil erosion, and soil compaction are also some of the well-known causes of subsidence.The NOAA also mentions that this phenomenon can “happen over very large areas like whole states or provinces, or very small areas like the corner of your yard.”

Reasons for Joshimath’s Land Subsidence

  • Incredibly Fragile Ecology:
    • Joshimath city has been built on an ancient landslide material — meaning it rests on a deposit of sand and stone, not rock, which doesn’t have high load-bearing capacity. 
    • This makes the area extremely vulnerable to ever-burgeoning infrastructure and population.
  • Blatant Ignorance:
    • The current developments in Joshimath are a combination of ignorance and apathy. 
  • Unplanned Urbanisation:
    • The unplanned and unauthorised construction has led to the blocking of the natural flow of water, which eventually results in frequent landslides.
  • Natural calamities:
    • The area is a seismic zone, which makes it prone to frequent earthquakes.
    • The region also faces frequent natural calamities such as landslides and flash floods. 
  • Ignored the Recommendations of Mishra Committee Report (conducted in 1976):
    • The Committee had concluded in its report that the land upon which the town is founded is, in fact, a deposit of sand and stone, the remnants of an ancient landslide. 
    • The town is not actually built on the “main rock” of the mountain. 
    • The report also pointed out that undercutting by the currents of the Alaknanda river makes the area even more prone to disasters
  • Hydel Projects:
    • The construction of the 520 MW NTPC Tapovan Vishnugad Hydro Power plant has perhaps done more damage to Joshimath’s foundations than anything else. 
    • The project being constructed on the Dhauliganga river required a tunnel to be built that cut right through the mountain upon which Joshimath is located. 
  • Land Erosion: 
    • Due to the running streams from Vishnuprayag and sliding along the natural streams are the other reasons behind the city’s fate.
  • Poor Drainage System:
    • The lack of a proper drainage system might have also contributed to the sinking of the area.
  • Geographic fault:
    • It might have been triggered by the reactivation of a geographic fault — defined as a fracture or zone of fractures between two blocks of rock — where the Indian Plate has pushed under the Eurasian Plate along the Himalayas.


  • Prohibition of Major Constructions:
    • Experts recommend a complete shutdown of development and hydroelectric projects in the region. 
    • Construction of the NTPC Hydro Power plant and along the Helang Bypass has ceased till further orders.
  • Rigorous Replantation:
    • Experts have also suggested replantation in the region, especially at the vulnerable sites to retain soil capacity. 
  • Redevelopment of Drainage System:
    • Drainage planning is one of the biggest factors that needs to be studied and redeveloped. 
    • The state government needs to look into the issue and create a new plan for the drainage system.
  • Evacuation of People:
    • The government has to put in an order evacuation plans for 4,000 prefabricated homes to help the residents of Joshimath.
    • The government must build resilience in the vulnerable areas through improved early warning systems, better construction quality etc.
  • Coordination Amongst Organizations:
    • There is a need for a coordinated effort between the government and civil bodies with the aid of military organizations to save Joshimath.
  • Studies by Technical Resources:
    • Technical resources from nearby areas need to be summoned to Joshimath to find a solution. 
    • The state government also needs to take scientific studies more seriously, which clearly spell out the reasons for the current crisis.


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