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India will face great problems in finding a way to finance public services in its large cities in the next two decades. Backlogs in service levels and infrastructure are already great, and migration to urban areas will put even more pressure on state and local government budgets. Metropolitan cities have an economic base of significant size, but have not been empowered to tap this revenue potential. State governments have more ability to reach a buoyant tax base, and to borrow, but must also use these resources to provide statewide services and to tend to the servicing needs of poorer local governments. The Indian Constitution poses significant constraints on the financing options, and neither the Central Finance Commission nor the State Finance Commissions have shown the way out of this problem. One could correctly say that India has not successfully implemented a strategy to address the fiscal problems of metropolitan areas.


International Center for Public Policy Working Paper Series #1233, Andrew Young School of Policy Studies, Georgia State University.

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