Finance Commission Proposes Targeted Urban Growth Strategy for India
The 16th Finance Commission has put forward a comprehensive plan aimed at accelerating and organizing India's urban expansion. The recommendations focus particularly on strengthening mid-sized cities and bringing rapidly urbanizing peripheral areas under municipal governance.
Key Priorities for Urban Local Body Grants
In its detailed report on urban local body (ULB) grants, the commission has identified two critical areas requiring immediate attention:
- Integrating peri-urban areas that already exhibit most urban characteristics into adjoining municipal corporations
- Modernizing drainage infrastructure specifically in cities with populations between 10 and 40 lakh
The commission emphasized that revamping urban drainage systems represents an urgent necessity, particularly for smaller and mid-sized cities that lack the financial capacity to undertake large infrastructure projects independently. While major metropolitan areas can mobilize resources more effectively, smaller municipalities face significant constraints.
Addressing Infrastructure Gaps in Growing Cities
"Taking into account the availability of limited resources, we have recommended the provision of some fiscal resources for revamping the drainage system in middle-level municipalities on a cost-sharing basis," the commission stated in its report.
The panel highlighted that accelerating urbanization remains among its core focus areas, recognizing urban growth as a crucial driver for boosting both rural and urban incomes. The commission projected that mid-sized cities will shoulder an increasing share of population and economic activity in coming years, making infrastructure improvements essential to manage rising urban demands effectively.
Strengthening Municipal Finances Through Property Tax Reforms
The report identified property tax administration as a critical area requiring reform to strengthen municipal finances. Despite being a vital revenue source for urban local bodies, property tax remains significantly underutilized across much of the country.
The commission recommended that states implement clearer rules and regulations to enhance property tax levy and collection, including:
- Adoption of GIS-based digital property tax registers linked with city master plans
- Mandatory periodic property enumeration and regular tax updates aligned with state guidance values
- Implementation of online self-assessment systems with automated demand notices and random scrutiny
- Use of unique property identification numbers for efficient billing and collections
"This property database may be appropriately linked with other databases, like water, sewerage, electricity, trade license and building permissions for automatic verification of property attributes and assessment records," the report suggested.
Creating Sustainable Urban Expansion Framework
The commission argued that integrating property records with GIS-based city master plans would ensure automatic updates whenever land-use plans are revised, keeping property records current and enabling timely tax assessment revisions.
When implemented together, these measures could help stabilize municipal finances and support more sustainable urban expansion patterns. The comprehensive approach addresses both immediate infrastructure needs and long-term financial sustainability for India's growing urban centers.
