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Municipal finance analysis: The case study of Gujarat (India)

Municipal finance analysis: The case study of Gujarat (India) This paper theoretically underpins the idea of greater involvement of local go vern - ments in the overall development of India explained through the theory of Fiscal Federalism. The theory outlines the dynamics of decentralization of power and func - tions through a multi-layered governance system leading to a new structure and added functions, finance, and accountability to local government. The paper also provides an overview of the increasing role of urban local governments in India and investigates whether the Urban Local Bodies (ULBs) of Gujarat – a state in India, are efficient to perform the functions and responsibilities assigned to them by the 74th Const itutional Amendment Act (CAA). It scrutinizes the financial health of local governments in the urban regions of India. The results based on the application of MANOVA indicate that the 74th CAA empowered ULBs with a strong economic base that these ULBs are Received on: 13th of September, 2020 capable of mobilizing their own resources. This means that smaller municipalities must Accepted on: 23rd of December, 2020 develop and convergence must be supported by a proportionate level of grants. This Published on: 4th of January, 2021 will ensure that with the development of social infrastructure, economic activities will increase, and, as a result, the conversion will occur. © Forum Dave, 2020 Keywords decentralization, urbanized Gujarat, Urban Local Government/Bodies (ULBs), municipal finance Forum Dave, Dr., Assistant Professor, JEL Classification H11, H29, H41, H71, H72 Sardar Patel Institute of Economic and Social Research, Ahmedabad, India. INTRODUCTION e Th theoretical justic fi ation for a multi-layered government i n a di - verse country like India emanates from the theory of Fiscal Federalism, which oe ff rs economic justic fi ation for multi-leveled government in - stitutions. It argues that unless there is no signic fi ant cost die ff rence of provision for goods and services to communities, it is much better for the local government to secure the provision of local goods and services to its citizens (Dave, 2010). The theory of fiscal federalism also makes use of cost-benet a fi nalysis in the allocation of various func - tions to different levels of government. According to this framework, a federal structure with a multi-level government, in which the powers and functions are evaluated at each level, is considered the best suited and optimal form of arrangement (Rao & Bird, 2010). The rationale behind such an argument is that this arrangement reaps the benetfi s of the advantages of decentralizati on. With such an arrangement, local issues could be resolved locally, with signic fi ant people’s participation, which is a major plank of any dem - This is an Open Access article, distributed under the terms of the ocratic society. u Th s, the rationale for local level governm ent both ur - Creative Commons Attribution 4.0 ban and rural has a strong foundation in theory and practice. International license , which permits unrestricted re-use, distribution, and reproduction in any medium, provided e r Th evenue resource collection should be based on ‘spatial mobility’. the original work is properly cited. a Th t means the sources that are immobile, such as property tax, should Conflict of interest statement: Author(s) reported no conflict of interest go to the local government (Kamer, 1983) and those having a mobile http://dx.doi.org/10.21511/pmf.09(1).2020.07 70 Public and Municipal Finance, Volume 9, Issue 1, 2020 source base must go to the State and Central government for ec ffi ient adminis tration and scrutiny. A solu - th tion to this problem is oe ff red by the 74 Constitutional Amendment Act (CAA) of India (Government of India, 1992). This amendment act provides a direction and lays down a frame work to strengthen the local government in all aspects. The local government may provide innovative way s and means in the produc - tion and provision of public goods. They may have the local solutions for local pr oblems. In this backdrop, the research paper investigates whether local governments have become ec ffi ient to per - form the functions and responsibilities assigned to them in Indian amend ment based on decentralization. What are the scrutinizing pattern followed by local level government and h ow self-sustaining they are? 1. LITERATURE REVIEW treating a place as urban in the 2011 census (GOI, 2011): Historical evidence suggests that the urbaniza - tion process is inevitable and universal. It is a pro - 1) All statutory towns, i.e. all places with munic - gressive concentration of the population in urban ipal corporations, municipal board, canton - units. Datta (2006) noted that urbanization is a ment board, notie fi d area, etc. process to switch from a spread-out pattern of hu - man settlements to one of concentration in urban 2) Census towns, which are non-statutory and are centers. He mentions three stages in the process of rural areas but satisfy the following criteria: urbanization: a) minimum population of 5000; 1) Stage one refers to a rural traditional society with predominance in agriculture and a dis - b) at least 75 percent of the male working persed pattern of settlements. population engaged in non-agriculture ac - tivities; and 2) Stage two refers to the acceleration stage where basic restructuring of the economy and c) a density of population of at least 400 per - investments in social overhead capitals, in - sons per sq. km. cluding transportation and communication th takes place. Here the proportion of the urban According to Mathur (2007), the 74 Constitutiona l population gradually increases from 25% to Amendment Act (CAA) 1992 on Municipalities, 40%, 50%, 60%, and so on, and the depend - is a path-breaking eo ff rt in achieving democrat - ence on the primary sector dwindles. ic decentralization in India. Before this, the local governments in India were organized based on 3) Stage three (terminal stage) – refers to the the ‘ultra vires’ principle [beyond the powers or stage where the urban population exceeds authority granted by law] and the state govern - 70% or more. At this stage, the level of urban - ments were free to extend or control the function - ization remains more or less the same or con - al sphere through executive decisions without an stant. Here the rates of growth of the urban amendment to the legislative provisions. As per th th population and total population become the the 12 Schedule of Article 243W of 74 CAA, same at this terminal stage. Urban Local Body should provide certain services and is entitled to certain powers (Mathur, 2007). th Urbanization is an irreversible process (Rao, 2008), e s Th ervices include (74 CAA, GOI, 1992): as ree fl cted in the case of India. India is now mov - ing towards the third stage of urbanization, while • Urban planning; the majority of the developed nations are into the third stage of urbanization. • Planning for economic and socia l development; In the modern era, according to an Indian defi - • Construction of roads and bridges and fire nition, the following criteria were adopted for service; http://dx.doi.org/10.21511/pmf.09(1).2020.07 71 Public and Municipal Finance, Volume 9, Issue 1, 2020 • Water supply for various purpose; Further, Ghuman and Mehta (2010) noted that the majority of the Urban Local Bodies across • Services like public health, sanitation, etc. the country are facing severe financial hardships and, hence, fail to provide adequate and quality The other services are the protection of the en - public services, including urban infrastructure to vironment, urban forestry, and promotion of their citizens. Moreover, water and sewerage – ba - ecological aspects; safeguarding the interests of sic services in India – are characterized by inade - weaker sections of society, including the hand - quate access, low level of services, and low custom - icapped and mentally retarded; slum improve - er satisfaction (Vaidya, 2003). ment and up-gradation and urban poverty alle - viation. Urban Local Bodies (ULBs) also provide To avoid this, the case study of Municipal Council urban facilities such as parks, gardens and play - Panchkula has been taken up by Ghuman and grounds, burials and burial grounds; cremation Mehta. They have taken the sample of 45 citizens grounds and electric crematorium, cattle pounds, from urban areas, 40 from villages (which fall prevention, vital statistics including registra - in the jurisdiction of the council), and 40 from tion of births and deaths. It also provides public slums/labor economies. The survey indicated that amenities. nearly 95 percent of the respondents were dissat - ise fi d with the quality of sanitation services and th However, the 74 Amendment Act provisions the contracted-out services are more accessible to are not applied to certain Scheduled Areas and the urban population followed by the rural popu - the Tribal Areas of India for example Meghalaya lation. Further, it was noted that local authorities and Mizoram. Yet, as noted by Mathur, in these succeed in getting the work done by the contrac - states, traditional municipal institutions (such as tors at the lowest costs, but the citizens sue ff r both municipal board, notiefi d area committee, etc.) on the account of inadequate supply of public ser - are functioning for the governance of urban areas. vices and their quality as urban local governments That said, due to diversity in geography and cul - normally go to passive mode once the municipal ture, the ee ff ct of legalizing the third layer of the services are contracted out. Hence, Ghuman and local urban institute is diverse . However, with rap - Mehta recommended that the State Governments id urbanization, Urban Local Bodies (ULBs) plays should provide adequate funds to local authorities. a signic fi ant role in India’s development (Bajwa, Alternatively, commercially viable projects can be 2008). These institutions are the instrument of en - developed (Vaida, 2003) by ULBs. However, Prest couraging local initiatives and harnessing them to (1960) suggested to bifurcate the activities, which creative channels (Singh, 1997). can be carried out by government and business sectors. Baxi (2019) noted that the economic contribu - tion, almost 60 percent of India’s GDP, comes Rao and Bird (2010) noted that India’s cities are from urban areas generating more than 75 % of large, economically important, and growing. the non-agriculture employment (Ministry of However, neither urban infrastructure nor the lev - Housing and Urban Poverty Alleviation, GoI, el of urban public services is adequate for current 2011). The urban cities are the hub of attracting in - needs. Rao and Bird suggest: vestment in various sectors and providing a wid - er market base and are considered as an engine of • e e Th xisting assignment system requires clar - economic growth. This poses greater challenges ity between various agencies delivering vari - for urban local government, particularly in terms ous services. of two important aspects, namely, to ensure effi - cient urban planning and ec ffi ient financial man - • e l Th argest cities should accord an independ - agement. Baxi highlighted the eight municipal ent status similar to the States in part to insu - corporations of Gujarat state and concluded that late them from localized and parochial biases. adequate fiscal power must be provided to mu - nicipal corporations to plan their local economic • e g Th overnance system in cities should pro - growth and development. mote cosmopolitanism and accommodative http://dx.doi.org/10.21511/pmf.09(1).2020.07 72 Public and Municipal Finance, Volume 9, Issue 1, 2020 policies to promote healthy social and eco - a highly urbanized state (Bhatt, 1984) and has an nomic interactions. increasing trend. According to the 2011 census (GOI, 2011), the Gujarat state is urbanized with • e c Th larity is required regarding the existing 42.1 percent (as against 37.35 percent in 2001). As definition of the role and functions of various administrative bodies such as urban local govern - institutions. ment, urban development, municipality, etc. sup - port the process of urbanization, the role of urban • e Th local level governance requires reforms for local bodies is very important. Today the state has city finance. 159 municipalities and eight municipal corpora - tions (as per the Bombay Municipal Act, 1949 and • e t Th ransfers from the central and state to ur - Gujarat Municipal Act, 1963). All the activities ban local governments require reforms. performed by these authorities are dependent on their finances. e Th refore, the focus of this study Development of Rurban centers with basic urban is to examine the finances of (ULBs) Urban Local amenities (in rural regions) can also address the Bodies in Gujarat. problem posed by urbanization ( Government of Gujarat , 2011). Further, Thakur (2006) noted that e l Th iterature review shows that Urban Local the financial health of an urban local body (ULB) Bodies (ULBs) now have legal status to grow in - is indicated by a set of closely interrelated factors dependently. This research study tried to examine and not merely on income-expenditure balance. the ee ff ctiveness of this decentralization. Further, Urban areas are known to contribute more than it is essential to examine that: sixty percent of national income. Yet in terms of resources, ULBs raise only 0.63 percent of national a) the average income and expenditure of de - income (GDP) from its typical public finance pat - veloped and developing urban local bodies tern to talk about own income of any municipality (ULBs) are similar; and resources for the year 2001–2002. b) the regional variation does not have any im - Another source is the grant. Municipal corpora - pact on the income and expenditure of ULBs. tions receive grants mostly from the state govern - ment. It has several roles, foremost of them is to 2. METHODS bridge the gap, since it is unlikely for the reve - nue-raising capacity of municipalities to perfect - ly match their expenditure needs. Thakur fur - e a Th nalysis of the finances of Urban Local Bodies in ther observed drawbacks in the budgeting sys - Gujarat has been undertaken from the historical per - tem of municipalities, as budget documents do spective. Gujarat is a heterogeneous state in terms of not contain physical or performance targets to economic and geographical parameters. This spatial be achieved through budget allocation. Hence no study was conducted to analyze the finances of se - achievements can be claimed by way of this budg - lected urban local bodies in Gujarat. The causal anal - etary expenditure. Hence, it is impossible to judge ysis was used to investigate the relationship between the financial health of municipalities. the financial position of municipalities concerning the total population as well as total income. Gujarat Urbanization in developing countries has a rich state is divided into v fi e major zones according to the and long history (Raju, 1997). The first phase of geographical classic fi ations (see Table 1). urbanization in the Indian sub-continent is asso - ciated with the Indus valley civilization, i.e. the e c Th riteria of developed and less developed mu - present-day state of Gujarat (Bhattacharya, 1979) nicipalities are adopted based on the classicfi a - and part of Pakistan. Gujarat, situated on the tion of municipalities according to the Indian west coast of India, is the seventh-largest state Constitution. Two zones namely, Saurashtra in the country in terms of area (1, 92022 sq. km) and North Gujarat (NG), are taken as samples. and tenth in terms of population (6.03 crores as Saurashtra has four municipal corporations, per 2011 census). It was observed that Gujarat is while North Gujarat has none. It is postulated that http://dx.doi.org/10.21511/pmf.09(1).2020.07 73 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table 1. Selected zones and districts of Gujarat Source: Gujarat State Portal. Zone District Central Ahmedabad, Kheda, Anand North Banaskantha, Patan, Mehsana, Sabarkantha, Gandhinagar South Godhra, Dahod, Bharuch, Narmada, Surat, Vadodara, Dang, Valsad, Navasari, Tapi Saurashtra Jamnagar, Rajkot, Porbandar, Junagadh, Amreli, Bhavnagar, Surendranagar Table 2. Selected municipalities and their specialty Class of Resides in the Municipality Population Specialty municipality district Jetpur I 1.18 Rajkot Industrial towns, fabric and exports of khanga and kitenge Vanthali IV 0.14 Junagadh Ghatapallava style step well, tourism Patan I 1.25 Patan Textile and mining industry, tourism Chanasama IV 0.15 Patan Gujarat industrial development corporation Note: Population is in lakhs, according to the 2011 census. RE CE YY+=βX+βεZ+ , Municipal Corporations with large populations, (3) id id id i id j ij larger resources, both physical and financial, and wider revenue-based help attain the benetfi s of where economies of scale. Four municipalities were se - RE d di RE lected as shown in Table 2. Y = YY + , where Y is the sum of reve - ij ij ij ij nue expenditure for developed municipalities Y ij di In this research paper, the multivariate analysis is and for developing municipalities Y ; ij also used to check the following hypotheses: CE d di CE Y YY+ , Y where is the sum of capital ij ij ij ij a) e a Th verage income (revenue and capital) of expenditure for developed municipalities Y and ij di developed municipalities is similar to that of developing municipalities Y ; ij developing municipalities. RI d di RI Y YY+ , where Y is the sum of reve - ij ij ij ij b) e a Th verage expenditure (revenue and capital) nue income in developed municipalities and ij di of developed municipalities is similar to that developing municipalities Y ; ij of developed municipalities. CI d di CI Y YY+ , where Y is the sum of capital ij ij ij ij c) eTh re is no dieff rence between the average income in developed municipalities Y and de - ij di capital expenditure of North Gujarat and veloping municipalities ; ij Saurashtra municipalities. RE NG S RE YY + Y , where Y is the sum of rev - ij id id ij NG d) eTh re is no dieff rence between the average enue expenditure in north Gujarat Y and id revenue expenditure of North Gujarat and Saurashtra municipalities Y ; id Saurashtra municipalities. CE NG S CE YY + Y , where Y is the sum of capital ij id id ij NG Financial analysis of developed and developing expenditure in north Gujarat Y and Saurashtra id municipalities: municipalities Y ; id RE CE YY+=βX+βεZ+ , (1) i = five-year period (from 2005–2006 to 2009– ij ij ij i ij j ij 2010), j = zone (1= north Gujarat region, 2= RY CY YY+=βX+βεZ+ . (2) Saurashtra region), d = devolvement criteria (de - ij ij ij i ij j ij veloped and developing municipalities), β = co- ij Financial analysis of north Gujarat and Saurashtra variance constant, X = developed municipalities th th region (of Gujarat): of i year, z = developing municipalities of i year, http://dx.doi.org/10.21511/pmf.09(1).2020.07 = Public and Municipal Finance, Volume 9, Issue 1, 2020 Source: Table A2 of the Appendix. Figure 1. Total income RE CE Y = Y = sum of revenue expenditure, sum e p Th attern of expenditure of urban local bodies ij ij of capital expenditure, Y = developed mu - reveals where its priorities lie. There is also a de - ij di nicipalities, Y = developing municipalities, tailed analysis of the trend in expenditure for four ij NG S Y = north Gujarat, Y = Saurashtra. municipalities. Total expenditure is divided into id id revenue and capital expenditure (Figures 2 and 3). e a Th nalysis is based on the secondary data ob - tained mainly from “yearly financial accounts” e Th capital expenditure mainly consists of the of municipalities (ULBs). The local government grant – tied or untied. eTh se funds depend on budget reefl cts the overall health of the local changing policies of central governments. Hence, economy and is the place where public scrutiny there is no clear trend for selected years. However, is focused. The period selected was 2005–2006 to Jetpur indicates sudden rise in year 2009–2010 2009–2010. The year 2005 was declared as “e Th due to capital grant under urban infrastructure Urban Year” by the Government of Gujarat. The development. Government provided special ‘Urban Year’ grants for urban infrastructure and services to various e c Th apital expenditure of any urban local body urban local bodies . To carry out a comparative consists only of the expenditure incurred from the analysis between two zones, multivariate analysis capital grants provided by a higher level of gov - is being used. ernment. The expenditure grants are divided in - to revenue grants and capital grants. The cost to perform various functions by urban local insti - 3. RESULTS AND DISCUSSION tutions requires larger funding, hence, a central and state government is required to support them To understand the financial health of urban local through the transfer of funds and grants. The to - bodies known as municipalities, the trend of in - tal revenue expenditure is divided into three major come and expenditure can be examined. Urban heads, namely tied, untied, and special (for under - Local Bodies in India are divided into two catego - standing it is presented as: administrative, social, ries (based on criteria of population namely) such socio-economical and economical). e Th grant of as Municipalities and Municipal Corporations. tied revenues is around 10 percent for developed municipalities and 23 percent for developing mu - 1 e im Th plementation and its effects can be observed only in later years. Hence, the next five years have (2005–2006 to 2009–2010) b een taken to understand the impact of allocated funds on the urban regions. http://dx.doi.org/10.21511/pmf.09(1).2020.07 75 Public and Municipal Finance, Volume 9, Issue 1, 2020 Source: Table A2 of the Appendix. Revenue 2005-06 2006-07 2007-08 2008-09 2009-10 1 Patan 2 Vanthali 3 Jetpur 4 Chanasama Figure 2. Revenue expenditure across municipalities in Gujarat Capital 2005-06 2006-07 2007-08 2008-09 2009-10 1 Patan 2 Vanthali 3 Jetpur 4 Chanasama Figure 3. Capital expenditure across municipalities in Gujarat nicipalities. This indicates developed municipali - streams based on economic activities such as a ties can cover their daily expenses from sources dairy business, a shop for cements, bolt and nut of revenue receipts. However, in case of major in - shops, etc. The purpose is to earn receipt, how - frastructure development, expenses are incurred ever, the cost, which was incurred for the same, from capital account. is considered under the heading of the economic expenditure. Table A1 of the Appendix provides details of total expenditure, which includes expenditure Out of the selected municipalities, the munic - grants too. The development of infrastructure ipality of Patan spent more than 46 percent on requires a capital grant. It is found that devel - infrastructure such as the construction of public oped municipalities generally spend more on amenities, i.e. public garden, hall, etc. (social ex - the construction of infrastructure (Table A1 of penditure), while Jetpur spent more than 29 per - the Appendix). cent of its expenditure on the development of ur - ban areas, including basic amenities like the de - In case of revenue expenditure, it was observed velopment of fire station, building a water tank, that ULBs have certain revenue generation etc. (socio-economical). The developing munici - http://dx.doi.org/10.21511/pmf.09(1).2020.07 76 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table 3. Distribution of revenue expenditure Source: Budgets of various municipalities, 2005–2006 to 2009–2010. As % to As % to As % to As % to Municipality/ Socio- Administrative total Social total total Economic total Years Economic expenditure expenditure expenditure expenditure Chanasama 2005–2006 210,4401 6.00 1,863,929 5.3 1,555,160 4.44 626,353 17.87 2006–2007 1,441,982 7.25 1,679,411 8.4 2,060,659 10.36 562,845.04 28.3 2007–2008 1,557,143 5.44 2,571,848 9.0 1,996,388 6.97 10,107,539 35.29 2008–2009 2,551,746 6.88 3,055,890 8.2 2,628,696 7.08 10,031,800 27.04 2009-2010 1,405,695 5.83 2,149,911 8.9 2,471,096 10.25 11,033,356 45.77 Patan 2005–2006 13,089,166 7.24 9,395,345 5.2 54,851,294 30.33 3,080,857 1.7 2006–2007 14,437,567 11.93 7,486,055 6.2 57,992,319 47.90 2,608,807 2.15 2007–2008 14,320,845 9.97 9,318,269 6.5 70,532,444 49.08 2,758,772 1.92 2008–2009 14,292,929 10.86 7,014,774 5.3 78,507,339 59.63 3,147,442 2.39 2009-2010 18,946,882 10.26 8,843,860 4.8 96,061,218 52.04 2,881,573 1.56 Vanthali 2005–2006 2,040,500 11.95 350,000 2.1 3,390,000 19.86 N.A N.A 2006–2007 1,856,213 13.94 241,167 1.8 3,810,318 28.61 N.A N.A 2007–2008 4,519,000 32.40 160,000 1.1 1,820,000 13.05 N.A N.A 2008–2009 2,978,309 17.40 355,728 2.1 5,907,133 34.52 N.A N.A 2009-2010 3,236,225 14.75 725,278 3.3 5,837,064 26.61 N.A N.A Jetpur 2005–2006 9,904,201 9.78 10,187,184 10.1 38,223,411 37.76 N.A N.A 2006–2007 8,517,531 9.07 7,646,908 8.1 36,992,829 39.40 N.A N.A 2007–2008 10,669,733 6.95 8,411,676 5.5 53,470,149 34.82 N.A N.A 2008–2009 10,265,741 7.97 8,220,215 6.4 56,758,582 44.06 N.A N.A 2009-2010 10,166,513 2.64 9,756,026 2.5 67,075,396 17.40 N.A N.A Note: This table does not include capital expenditure and, therefore, the total shall not add up to 100; The revenue expenditure is indicated as a percentage of total expenditure. N.A. indicates data is not available. palities like Chanasma and Vanthali spent more case of developed municipalities, such as Patan, than 20% on infrastructure development. the expenditure on water (SE) is around 20 per - cent, while Jetpur has the highest expenditure e t Th rend in expenditure pattern shows the focus on solid-waste management (SE), followed by ex - area of development by municipalities. In the case penditure on water (SE) and streetlight (SE). In of developed municipalities, the center point is so - the case of developing municipalities such as cio-economic development. Chanasma, the highest expenditure is on street lights, followed by water and solid-waste manage - Hence, the local government of urbanized states ment. For Vanthali, the highest expenditure is on such as Gujarat must focus on the development of solid waste management and streetlights. Notably, infrastructure and services resulting in the high - Gujarat has a major urban region with zero-waste est allocation for the socio-economical sector. This urban regions and the availability of potable water. does include essential goods like water and public construction works. Moving further, the state government is termed as a welfare government; hence it is essential to Appendix A (Table A1) provides the overall dis - perform functions that lead to positive external - tribution of total expenditure, while the revenue ities in society. o Th se functions are called ‘social expenditure has been presented in Table 3. In the functions’ in the municipal budget. The expend - 2 a) Total expenditure is divided into revenue expenditure and capital expenditure. Revenue expenditure (sa lary expenditure, water expenditure, cost on solid waste management, etc.) is further divided into various activities. b) Categories such as administrative expenditure, social expenditure, economic expenditure, socio-economic expen diture, and revenue grants expenditure. Capital expenditure consists of only capital grant expenditure, etc., most o f which is based on state government budget classification. http://dx.doi.org/10.21511/pmf.09(1).2020.07 77 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table 4. Distribution of total income (in %) Source: Budgets of various municipalities, 2005–2006 to 2009–2010. Municipality/ Own Municipality/ Grants Others Own income Grants Others Years income Years Patan Chanasama 2005–2006 59.4 19.57 21.03 2005–2006 44.16 50.79 5.05 2006–2007 58.64 27.54 13.82 2006–2007 49.34 46.1 4.56 2007–2008 54.21 36.29 9.51 2007–2008 48.38 49.13 2.49 2008–2009 68.8 17.71 13.5 2008–2009 42.77 57.08 0.15 2009–2010 66.85 26.28 6.87 2009–2010 67.2 29.47 3.33 Jetpur Vanthali 2005–2006 17.29 60.5 22.21 2005–2006 13.5 83.6 2.9 2006–2007 17.61 68.85 13.54 2006–2007 39.52 55.61 4.86 2007–2008 14.13 70.85 15.02 2007–2008 35.65 61.41 2.94 2008–2009 24.78 57.8 17.42 2008–2009 36.78 55.43 7.79 2009–2010 13.76 71.39 14.86 2009–2010 71.2 19.47 9.33 iture on social function is hardly five percent of and developed. This indicates a reduction in the total expenditure in selected municipalities. In financial ability of the local bodies, since the de - the case of developing municipalities, it is, by and pendency on the grants is higher (Table A2 of the large, in single-digit only. Oates (1972), in his book Appendix). ‘Fiscal Federalism’, pointed out that the establish - ment of any layer of government itself incurs the Distribution of total revenue by own income and cost, namely the cost of establishment and mainte - other income: Total revenue income is divided into nance. Ree fl cting that the onerous expenditure, i.e. income earned through own sources and income administrative expenditure of almost all munici - through other sources. Other sources of income palities, is around 10 percent of total expenditure. in urban local bodies consist of loans, advances, Although there is no specic t fi rend, it is interest - deposits, and miscellaneous. ing to note that in the case of developed munic - ipalities, Patan, with 42 percent, has the highest Own income of municipalities consists of tax in - growth rate of administrative expenditure. come, non-tax income, and income from oth - er miscellaneous sources such as town planning e r Th evenue account consists of revenue receipts and funds, auction of old furniture or storeroom items, capital receipts. Revenue receipts of municipalities vehicles, etc. The share of tax and non-tax income include current (yearly) income from various sourc - as a percentage of total own income is presented es such as own-income, revenue grants, others. The in Table A2 of the Appendix. In general, the de - trend is depicted in Table A2 of Appendix. Moreover, veloped municipalities of Patan indicate the share the revenue account growth is overall positive for the of tax income is great than non-tax income due developed municipality except for one year in the to higher shares of property tax and water tax. case of Patan. The growth rate (CAGR) for the de - However, in the case of Jetpur, the share of non-tax veloped municipalities such as Patan and Jetpur are is higher compared to tax revenue due to a high - 0.06, and 0.20, respectively. The developing munic - er share of non-tax income like fees, including li - ipalities also indicate promising growth rates. For cense fees, notice fees, property transfer fees, shop example, Chanasma and Vanthali indicate overall registration fees, etc. In the case of developing mu - growth, except for one year. nicipalities, except Vanthali, the major share of revenue comes from non-tax income. Vanthali has e c Th apital income consists of mainly grant in - a major share of income from property tax; and, it come, hence some variations in the trends are ex - was octroi too till the year 2006–2007. The major pected. For example, Jetpur has a negative growth share in non-tax revenue income is from miscella - rate for one year. The developing municipalities al - neous non-tax income in the case of Chanasama. so have negative growth rates for at least two years. e Th income from grants is greater than the own e d Th eveloped municipalities received a major income in all selected municipalities, developing share of the grants in their capital accounts as http://dx.doi.org/10.21511/pmf.09(1).2020.07 78 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table 5. Deficits in budget (Rs. in crores) Source: Calculated from income and expenditure of various municipal budgets. Municipality/ Municipality/ TD RD KD TD RD KD Years Years Patan Chansama 2005–2006 –1.07 2.31 –3.37 2005–2006 –1.27 –0.02 –1.23 2006–2007 0.99 –0.54 1.54 2006–2007 0.16 0.01 0.14 2007–2008 2.51 –0.32 2.79 2007–2008 0.21 –0.2 0.43 2008–2009 0.55 –0.02 0.56 2008–2009 –0.25 –0.25 –0.01 2009–10 0.88 0.11 0.77 2009–10 0.22 0.12 0.09 Jetpur Vanthali 2005–2006 0.12 –0.92 –4.97 2005–2006 0.01 – 0.24 0.24 2006–2007 3.12 0.03 –2.55 2006–2007 0.008 –0.02 0.02 2007–2008 3.49 0.16 –4.74 2007–2008 –0.066 –0.13 0.24 2008–2009 3.41 0.64 2.77 2008–2009 0.908 –0.05 0.79 2009–10 –6.35 1.26 –7.6 2009–10 –0.54 0.21 – 0.75 Note: TD = Total deficit, RD = Revenue deficit, CD = Capital deficit. shown in Table A2 of Appendix. However, reve - urban local government that indicates the planning nue grants contributed marginally to the total in - and priorities of an urban local government. come of the selected municipalities. In the case of Patan and Jetpur, the income from capital grants Table 5 provides detailed information on various contributed the highest to their total income from dec fi it parameters. The municipality-wise analysis grants. Even in the case of capital grants, urban is presented below. development and miscellaneous grants are major contributory factors for Jetpur municipality. In to - e P Th atan municipality indicates an overall defi - tal capital grants for Patan municipality, the share cit for the first year (2005–2006) of the study, fol - of infrastructure development is a major one. The lowed by a surplus in the next year (2006–2007). grants to the own income ratio indicates the de - e d Th ec fi it is due to higher capital expenditure on pendency ratio of urban local government, which public amenities. The revenue account indicates a is highest for Patan. surplus for the first year followed by a dec fi it for the next two years, i.e. 2006–2007 and 2007–2008. e g Th rant helps to reduce horizontal equity, as This indicates overall higher administrative and each municipality has diverse abilities, as well as socio-economic expenditure. The capital account a tax base to augment income. In the case of de - indicates a dec fi it for the year 2005–2006, followed veloped municipalities such as Patan and Jetpur, by a surplus for the next four years of the study. their income constitutes the major source of rev - e d Th ec fi it budget in the Patan municipality is on - enue, indicating that local government bodies ly for the financial year 2005–2006. e Th capital ac - have strengthened their revenue base. In contrast, count faced a dec fi it due to larger spending by mu - grants are the major source of revenue for devel - nicipalities for the construction of infrastructure oping municipalities. The source of revenue is such as a public hall. presented in Table 4. The detailed distribution of revenue income by own income and others is de - The overall budget of the Jetpur municipality picted in Table A2 of the Appendix. indicates a surplus except for the last year of the study, i.e. 2009–2010. The revenue account in - e t Th otal dec fi it depicts the gap between income and dicates a surplus for the first year of the study. expenditure of municipalities. Here is an attempt to The surplus indicates a higher contribution analyze revenue and capital dec fi it. The budget of from non-tax income. Moreover, sanitation tax an urban local body is a financial statement of the and streetlight fee contributions lead to a sur - http://dx.doi.org/10.21511/pmf.09(1).2020.07 79 Public and Municipal Finance, Volume 9, Issue 1, 2020 plus in the revenue account. In the case of the 2006 and 2008–2009 due to a deficit in both capital account, there is a deficit for all the five revenue and capital account. In 2009 – 2010, years of the study except 2008–2009. The cap - there is a reduction in capital grants (income), ital (grant) expenditure is found to be increas - while spending remains unchanged leading to a ing. In the case of developed municipalities, the deficit in the capital account. However, its ‘own adequate revenue in the budget provides better funds’ are utilized to continue constructional services, hence, it has a comparatively stronger activities that lead to a deficit in the revenue fiscal position. This helps to create basic infra - account. The Vanthali municipality indicates structure and public places in the city. Big cities an overall surplus for the first two years of the (Class A type city) provide employment oppor - study, followed by a deficit in the year 2007– tunities and, therefore, attract the population 2008 and then a surplus again in 2008–2009. from nearby rural and semi-rural regions. It The capital account indicates a surplus in the thus reduces the financial pressure of the mu - budget, except the year 2009–2010, due to the nicipal corporation of the district, i.e. Rajkot. reduction of grants received from a higher layer The detail of total income, expenditure, as well of government. The revenue account indicates as revenue and capital income, expenditure is a deficit in the year 2007–2008 due to high ad - indicated in the Appendix (Tables A1 and A2). ministrative costs. A quantitative analysis is at - tempted to understand the nature and degree of The first year indicates a deficit budget for dependency of municipalities on various sourc - Chanasma, followed by a surplus for the next es of revenues. two years of the study. However, 2009–2010 in - dicates a deficit in the overall budget of the mu - A multivariate analysis (MANOVA) is carried nicipality. The first year of the study indicates out to understand the dynamics of revenue and a deficit in the revenue account, followed by a expenditure of the two zones such as Saurashtra surplus. Again, the years 2007–2008 and 2008– and North Gujarat. An attempt is made to un - 2009 indicate a deficit followed by a surplus in derstand whether or not the different compo - the account. The capital account of the munici - nents of the municipal budget, such as expend - pality has a deficit for the first year of the study, iture, income, and deficit, component of in - followed by a surplus in the account for the next come and component of expenditure, etc., differ two years. The year 2008–2009 indicates defi - significantly between the regions and types of cit, but once again the year 2009–2010 indicates municipalities. The models for testing have an surplus in the capital account. Chanasma mu - equation for each model. The postulation is that nicipality indicates a deficit for the years 2005– there is no significant difference between mu - Table 6. Revenue and capital expenditure of developed and developing municipalities Revenue expenditure Mean Sample size (N) F-ratio Developed 8.66 10 Municipalities Developing 104.29* 1.378 10 Municipalities Total 5.019 20 Intercept 198.17* Capital expenditure Mean Sample size (N) F-ratio Developed 7.241 10 Municipalities Developing 7.50** 0.825 10 Municipalities Total 4.033 20 Intercept 11.86* R Squared .853 (Adjusted R Squared = .845) Note: * represents the 1% level of significance, and ** represent the 5% level of significance. http://dx.doi.org/10.21511/pmf.09(1).2020.07 80 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table 7. Revenue and capital income of developed and developing municipalities Revenue income Mean Sample size (N) F-ratio Developed municipalities 8.93 10 Developing municipalities 1.32 10 93.01* Total 5.13 20 Intercept 168.8* Capital income Mean Sample size (N) F-ratio Developed municipalities 5.76 10 Developing municipalities 0.82 20 11.08** Total 3.29 10 Intercept 19.67* R Squared .838 (Adjusted R squared = .829) Note: * represents the 1% level of significance, and ** represent the 5% level of significance. Table 8. Municipalities of North Gujarat and Saurashtra Revenue expenditure Mean Sample size (N) F-ratio North Gujarat 10.0060 5 Saurashtra 7.3140 5 6.21* Total 8.6600 10 Intercept 257.01* Capital expenditure Mean Sample size (N) F-ratio North Gujarat 2.9760 5 Saurashtra 11.5060 5 4.71** Total 7.2410 10 Intercept 13.56* R Squared .437 (Adjusted R Squared = .367) Note: * represents the 1% level of significance, and ** represent the 5% level of significance. nicipalities of these two regions, and also across developing municipalities. Higher administrative developed and developing municipalities. The and socio-economic costs lead to higher revenue result and analysis of MANOVA Equation 1 in - expenditure of developed municipalities. Overall, dicate expenditure (revenue and capital) of de - development, especially infrastructure, indicates veloped and developing municipalities (Table 6). higher capital spending for developed municipali - Table 7 highlights the result for MANOVA. ties. Almost 85 percent of the variation in revenue Equation 2 indicates the revenue and capital and capital expenditure of developing and devel - income of developed and developing munici - oped municipalities is explained by the model. It palities. The MANOVA results of inter-zonal indicates that the growth of a region is backed by comparison of municipalities of north Gujarat higher expenses. and municipalities of Saurashtra as indicated in Equation 3 are provided in Table 8. Table 7 shows that the average revenue income and the average capital income of developed municipal - Table 6 shows that the average revenue expenditure ities are much higher than the developing munici - and the average capital expenditure of developed palities. This is due to a higher share of their own in - municipalities are much higher than the develop - come in their budget when an average remain high. ing municipalities. All four tests signicfi ant and All four tests are signic fi ant and display F-values. display F-values. There is a signic fi ant die ff rence e Th re is a signic fi ant die ff rence between the aver - between the average revenue expenditure and the age revenue income and the average capital income average capital expenditure between developed and between developed and developing municipalities. http://dx.doi.org/10.21511/pmf.09(1).2020.07 81 Public and Municipal Finance, Volume 9, Issue 1, 2020 Almost 83.8 percent of the variation in revenue and er than the municipalities in North Gujarat. capital income of developing and developed munic - However, in the case of revenue expenditure, ipalities is explained by the model. the average of North Gujarat is higher than Saurashtra. The investment in infrastructure Tables 6 and 7 indicate that the growth of an ur - further enhances the overall development. The ban region is backed by higher expenses both on capital expenditure indicates investment in revenue and capital budget. However, it is support - various long-term projects that are expected to ed by higher income, especially partially the own provide higher returns in the future. However, funds. This is noteworthy that developed munici - greater revenue expenditure indicates a higher palities in both the regions attempt to augment the ‘exhaustive spending’ that does not lead to any financial resources for continuous development. return in the future. All four tests of signifi - However, the regional variation must be taken in - cance display ‘F-value’ results in rejection of the th to consideration. The purpose of the 74 CAA is to null hypothesis and establish that there is a sig - serve as overall dependency has reduced. Though nificant difference between the average of rev - the scenario is die ff rent for developed and develop - enue expenditure and mean of capital expend - ing municipalities. iture between North Gujarat and Saurashtra. Almost 44 percent of the variation in revenue Table 8 shows that the average capital expend - and capital expenditure of North Gujarat and iture of municipalities in Saurashtra is high - Saurashtra is explained by the model. CONCLUSION Urbanization is an essential criterion to scrutinize the growth of soci ety. Many urban problems th that cannot be handled at the center or state level could be best handled at the local l evel. The 74 Constitutional Amendment Act (CAA) in 1992 was promulgated to promote de centraliz ation and th th strengthen the grass-root level governance. As per the 12 schedule of Article 243W of 74 CAA, ULB should provide basic urban amenities. This calls for fiscal au tonomy along with functional responsi - bilities. Overall dependency has reduced. Although, the municipali ty with better financial resources and economic opportunity stands to gain more compared to the smaller one. The s cenario has not changed even today in 2020. The higher layer of the government must guide these l ocal units in de - veloping economically viable projects. However, the higher capital deficit of Jetpur indicates that infrastru cture expenditure is increasing tremendously, indeed thanks to rising employment opportunities in th e region. Hence, the con - centrations of municipal corporations in the Saurashtra zone indica te higher investment in infra - structure and capital-related activities. However, both zones mus t invest heavily in e-government, environmental issues such as solid-waste, and focus on the redu ction of the deficit. This also high - lights the fact that municipalities in peripheral regions of major urban ce nters tend to get benefits. Increases in revenue expenditure need to be controlled for the ec ffi ient us ages of available resources, in particular administrative costs, by adopting the technology. Ec ffi ient and technical staff is required. Municipalities are required to generate new and innovative sources of i ncome to cover the increasing expenditure; however, for this, the understanding of the region is impo rtant. The sta, i ff ncluding the chief oc ffi er, must be appointed from the local area for a better understandi ng of the economic and social aspects of the region. Thus, municipalities can generate funds fro m the public for various social purposes. A local-level economic model will help. It has been observed that m ost local institutions fol - low the national model, changes are needs to reduce the dependency and explo re the regionally available talent and resources. http://dx.doi.org/10.21511/pmf.09(1).2020.07 82 Public and Municipal Finance, Volume 9, Issue 1, 2020 AUTHOR CONTRIBUTIONS Conceptualization: Forum Dave. Data curation: Forum Dave. Formal analysis: Forum Dave. Investigation: Forum Dave. Methodology: Forum Dave. Project administration: Forum Dave. Writing – original draft: Forum Dave. Writing – review & editing: Forum Dave. REFERENCES 1. Bajwa, S. G. (2008). Chandigarh Council Panchkula. Nagarlok, 15. Musgrave, R. A., & Musgrave, P. B. Municipal Reforms, a requisite XLII(1), 50-68. Retrieved from (1973). Public Finance in Theory in milieu of emerging urban and Practice. McGraw- Hill https://www.researchgate.net/ problems. Nagarlok, XL(3), Indian International. 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Singh, U. B. (2005). Urban an overview. National Institute ta, A. (2010). Privatization Mizoram: Perspectives for of Urban Affairs, New Delhi. of Public Services by Urban Initiating Modern Local Retrieved from https://www.eldis. Local Governments in India: Government. Nagarlok, org/document/A38582 a Case Study of Municipal http://dx.doi.org/10.21511/pmf.09(1).2020.07 83 Public and Municipal Finance, Volume 9, Issue 1, 2020 XXXVII(1), Indian Institute of Haryana. Nagarlok, XXXIX, 26. Urban Profile of Local Govern - Indian Institute of Public Public Administration, New ment. Retrieved from https:// Administration, New Delhi. Delhi. nios.ac.in/media/documents/ srsec317newE/317EL16.pdf 24. Urban Profile of Ancient 22. Sodhi, I. Sing. (2004). Challenge Dwaraka City. Retrieved from and Prospects of Urbanization- 27. Vaidya, C. (2003). Private Sector http://www.drs.nio.org/drs/ Need For Better Approach and Participation in Urban Water bit stream/2264/3602/I/man_ Supply and Sanitation Sector In Strategy. Nagarlok, XXXVI(2), environ_34_72a.pdf India. Financial Issues in Water Indian Institute of Public Sectors, Published by Sardar Administration, New Delhi. 25. Urban Profile of Gujarat state. Patel Institute of Economic and Retrieved from http://www. 23. Subhash, C. A., & Prabhakar, Social Research. gujaratindia.com/state-profile/ R. K. (2007). Post-74th govt-department.htm Amendment Scenario in http://dx.doi.org/10.21511/pmf.09(1).2020.07 84 Public and Municipal Finance, Volume 9, Issue 1, 2020 APPENDIX A Table A1. Total expenditure (Rs in Lakhs) Patan 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Administrative 130.89 144.38 143.21 142.93 189.47 as % of total expenditure 7.24 11.93 9.97 10.86 10.26 Economical 30.81 26.09 27.59 31.47 28.82 as % of total expenditure 1.7 2.15 1.92 2.39 1.56 Others 5.37 4.32 3.93 5.58 6.33 as % of total expenditure 0.3 0.36 0.27 0.42 0.34 Social 93.95 74.86 93.18 70.15 88.44 as % of total expenditure 5.19 6.18 6.48 5.33 4.79 Socio-economical 548.51 579.92 705.32 785.07 960.61 as % of total expenditure 30.33 47.9 49.08 59.63 52.04 Revenue grants 1.97 1.17 1.64 3.96 7.21 as % of total expenditure 0.11 0.1 0.11 0.3 0.39 Capital grants 610.24 146.46 243.52 134.74 353.08 as % of total expenditure 33.74 12.1 16.95 10.23 19.13 Total grants 612.2 147.63 245.16 138.7 360.29 as % of total expenditure 33.85 12.19 17.06 10.54 19.52 Total capital expenditure 610.24 146.46 243.52 134.74 353.08 Loans 3.95 20.45 17.71 4.56 18.98 as % of total expenditure 0.22 1.69 1.23 0.35 1.03 Extra 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Deposits 193.52 181.89 175.75 94.67 138.07 as % of total expenditure 10.7 15.02 12.23 7.19 7.48 Advance 189.53 31.08 25.22 43.41 54.88 as % of total expenditure 10.48 2.57 1.75 3.3 2.97 Total expenditure 1808.74 1210.62 1437.07 1316.54 1845.89 Vanthali 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Administrative 20.41 18.56 45.19 29.78 32.36 as % of total expenditure 11.95 13.94 32.4 17.4 14.75 Economical 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Others 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Social 3.5 2.41 1.6 3.56 7.25 as % of total expenditure 2.05 1.81 1.15 2.08 3.31 Socio-economical 33.9 38.1 18.2 59.07 58.37 as % of total expenditure 19.86 28.61 13.05 34.52 26.61 Revenue grant 1.24 6.87 4.16 4.55 3.6 as % of total expenditure 0.73 5.16 2.98 2.66 1.64 Capital Grants 108.75 64.11 64.4 53.77 88.62 as % of total expenditure 63.71 48.13 46.18 31.42 40.39 Total grants 109.99 70.98 68.56 58.31 92.22 as % of total expenditure 64.43 53.29 49.16 34.08 42.03 Total Capital Expenditure 108.75 64.11 64.4 53.77 88.62 Loan 0 0 20 0 0 as % of total expenditure 0 0 1.43 0 0 Extra 0 1.67 1.61 2.03 0 as % of total expenditure 0 1.20 0.89 0.92 0 Deposits 1.71 0.59 1.56 5.2 21.98 as % of total expenditure 1 0.44 1.11 9.35 10.02 Advance 1 2.42 0 2.31 0.51 as % of total expenditure 0.59 1.82 0 1.35 0.23 Total expenditure 170.71 134.73 156.72 160.27 212.69 http://dx.doi.org/10.21511/pmf.09(1).2020.07 85 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table A1 (cont.). Total expenditure (Rs in Lakhs) Jetpur 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Administrative 99.04 85.18 106.7 102.66 101.67 as % of total expenditure 9.78 9.07 6.95 7.97 2.64 Economical 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Others 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Social 101.87 76.47 84.12 82.2 97.56 as % of total expenditure 10.06 8.14 5.48 6.38 2.53 Socio-economical 382.23 369.93 534.7 567.59 670.75 as % of total expenditure 37.76 39.4 34.82 44.06 17.4 Revenue grant 1.83 4.23 10.77 8.24 25.43 as % of total expenditure 0.18 0.45 0.7 0.64 0.66 Capital grants 216.59 220.34 451.55 326.65 2566.31 as % of total expenditure 21.4 23.47 29.41 25.36 66.56 Total grants 218.43 224.57 462.32 334.89 2591.74 as % of total expenditure 21.58 23.92 30.11 26 67.22 Total capital expenditure 216.59 220.34 451.55 326.65 2566.31 as % of total expenditure 0.04 0.53 0.01 0.12 0.01 Loan 15.69 23.08 69.68 12.1 16.4 as % of total expenditure 1.55 2.46 4.54 0.94 0.43 Extra 116.71 70.01 120.98 38.4 66.92 as % of total expenditure 11.53 7.46 7.88 2.98 1.74 Deposits 48.02 45.17 37.52 13.18 173.12 as % of total expenditure 4.74 4.81 2.44 1.02 4.49 Advance 29.99 39.48 119.33 135.6 137.23 as % of total expenditure 2.96 4.21 7.77 10.53 3.56 Total expenditure 1011.97 933.89 1535.35 1286.62 3855.39 Chanasama 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Administrative 21.04 14.42 15.57 25.52 14.06 as % of total expenditure 14.57 9.73 6.49 11.35 6.41 Economical 62.64 56.28 101.08 100.32 110.33 as % of total expenditure 17.49 27.65 34.33 26.77 44.14 Others 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Social 18.64 16.79 25.72 30.56 21.5 as % of total expenditure 5.32 8.45 8.98 8.24 8.92 Socio-economical 15.55 20.61 19.96 26.29 24.71 as % of total expenditure 4.44 10.36 6.97 7.08 10.25 Revenue Grant 1.02 2.87 8.67 0.07 0.51 as % of total expenditure 0.29 1.44 3.03 0.02 0.21 Capital Grants 200.3 44 39.46 142 19.87 as % of total expenditure 57.13 22.12 13.78 38.27 8.24 Total Grants 201.32 46.86 48.13 142.07 20.38 as % of total expenditure 57.42 23.57 16.8 38.29 8.46 Total capital expenditure 201.32 46.86 48.13 142.07 20.38 Loan 1.47 2.48 19.82 0 9.64 as % of total expenditure 0.42 1.25 6.92 0 4 Extra 5.23 5.06 3.81 4.3 1.33 as % of total expenditure 1.49 2.54 1.33 1.16 0.55 Deposits 0.23 1.15 0.87 0 0.39 as % of total expenditure 0.07 0.58 0.3 0 0.16 Advance 0.39 0.49 2.2 0 0 as % of total expenditure 0.11 0.25 0.77 0 0 Total expenditure 326.51 164.15 221.59 329.06 202.34 http://dx.doi.org/10.21511/pmf.09(1).2020.07 86 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table A2. Total income (Rs. In lakhs) Patan 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Own income 992.49 746.32 888.81 948.90 1,249.98 As % to total income 59.40 58.64 54.21 68.80 66.85 Grants 326.94 350.58 595.01 244.20 491.36 As % to total income 19.57 27.54 36.29 17.71 26.28 Loan 0.00 0.00 0.00 40.00 0.00 As % to total income 0.00 0.00 0.00 2.95 0.00 Advance 173.77 32.03 42.28 56.76 60.81 As % to total income 10.40 2.52 2.58 4.12 3.25 Deposits 177.67 143.82 113.59 89.38 67.64 As % to total income 10.63 11.30 6.93 6.48 3.62 Extra 0.00 0.00 0.00 0.00 0.00 As % to total income – – – – – Total income 1670.9 1272.8 1639.7 1379.2 1869.8 Chanasama 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Own income 98.90 105.79 148.65 146.07 175.44 As % to total income 44.16 49.34 48.38 42.77 67.20 Grants 113.74 98.86 150.94 194.95 76.93 As % to total income 50.79 46.10 49.13 57.08 29.47 loan 5.71 3.01 1.77 1.50 9.03 As % to total income 2.55 1.41 0.58 0.44 3.43 Advance 0.39 0.49 0.70 0.00 0.00 As % to total income 0.17 0.23 0.23 0.00 0.00 Deposit 0.26 1.16 0.86 0.01 0.40 As % to total income 2.55 1.41 0.58 0.44 3.43 Extra 4.94 5.11 4.31 0.00 1.27 As % to total income 2.20 2.38 1.40 0.00 0.48 Total income 223.9 214.4 307.2 342.5 263.1 Jetpur 2005–2006 2006–2007 2007–2008 2008–2009 2009-2010 Own income 182.08 220.65 265.11 411.59 455.95 As % to total income 17.29 17.61 14.13 24.78 13.76 Grants 636.91 862.53 1329.22 960.18 2366.17 As % to total income 60.50 68.85 70.85 57.80 71.39 loan 11.11 12.47 12.29 70.15 21.47 As % to total income 1.06 1.00 0.66 4.22 0.65 Advance 20.68 15.36 116.22 117.67 124.80 As % to total income 1.96 1.23 6.19 7.08 3.77 Deposit 80.93 56.64 31.21 31.02 256.98 As % to total income 7.69 4.52 1.66 1.87 7.75 Extra 121.10 85.11 122.12 70.56 89.18 As % to total income 11.50 6.79 6.51 4.25 2.69 Total income 1052.8 1252.8 1876.2 1661.2 3314.5 Vanthali 2005–2006 2006–2007 2007–2008 2008–2009 2009-2010 Own income 23.45 54.22 53.98 92.39 116.60 As % to total income 13.50 39.52 35.65 36.78 71.20 Grants 145.13 76.30 92.98 139.25 31.88 As % to total income 83.60 55.61 61.41 55.43 19.47 loan 0.10 0.00 0.60 3.29 5.38 As % to total income 0.06 0.00 0.40 1.31 3.28 Advance 1.00 2.37 0.00 2.42 0.73 As % to total income 0.58 1.73 0.00 0.96 0.45 Deposit 0.83 1.77 1.20 11.46 4.63 As % to total income 0.48 1.29 0.79 4.56 2.83 Extra 3.10 2.54 2.65 2.40 4.55 As % to total income 1.79 1.85 1.75 0.96 2.78 Total income 173.6 137.2 151.4 251.2 163.8 http://dx.doi.org/10.21511/pmf.09(1).2020.07 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Public and Municipal Finance Unpaywall

Municipal finance analysis: The case study of Gujarat (India)

Public and Municipal FinanceJan 4, 2021

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Abstract

This paper theoretically underpins the idea of greater involvement of local go vern - ments in the overall development of India explained through the theory of Fiscal Federalism. The theory outlines the dynamics of decentralization of power and func - tions through a multi-layered governance system leading to a new structure and added functions, finance, and accountability to local government. The paper also provides an overview of the increasing role of urban local governments in India and investigates whether the Urban Local Bodies (ULBs) of Gujarat – a state in India, are efficient to perform the functions and responsibilities assigned to them by the 74th Const itutional Amendment Act (CAA). It scrutinizes the financial health of local governments in the urban regions of India. The results based on the application of MANOVA indicate that the 74th CAA empowered ULBs with a strong economic base that these ULBs are Received on: 13th of September, 2020 capable of mobilizing their own resources. This means that smaller municipalities must Accepted on: 23rd of December, 2020 develop and convergence must be supported by a proportionate level of grants. This Published on: 4th of January, 2021 will ensure that with the development of social infrastructure, economic activities will increase, and, as a result, the conversion will occur. © Forum Dave, 2020 Keywords decentralization, urbanized Gujarat, Urban Local Government/Bodies (ULBs), municipal finance Forum Dave, Dr., Assistant Professor, JEL Classification H11, H29, H41, H71, H72 Sardar Patel Institute of Economic and Social Research, Ahmedabad, India. INTRODUCTION e Th theoretical justic fi ation for a multi-layered government i n a di - verse country like India emanates from the theory of Fiscal Federalism, which oe ff rs economic justic fi ation for multi-leveled government in - stitutions. It argues that unless there is no signic fi ant cost die ff rence of provision for goods and services to communities, it is much better for the local government to secure the provision of local goods and services to its citizens (Dave, 2010). The theory of fiscal federalism also makes use of cost-benet a fi nalysis in the allocation of various func - tions to different levels of government. According to this framework, a federal structure with a multi-level government, in which the powers and functions are evaluated at each level, is considered the best suited and optimal form of arrangement (Rao & Bird, 2010). The rationale behind such an argument is that this arrangement reaps the benetfi s of the advantages of decentralizati on. With such an arrangement, local issues could be resolved locally, with signic fi ant people’s participation, which is a major plank of any dem - This is an Open Access article, distributed under the terms of the ocratic society. u Th s, the rationale for local level governm ent both ur - Creative Commons Attribution 4.0 ban and rural has a strong foundation in theory and practice. International license , which permits unrestricted re-use, distribution, and reproduction in any medium, provided e r Th evenue resource collection should be based on ‘spatial mobility’. the original work is properly cited. a Th t means the sources that are immobile, such as property tax, should Conflict of interest statement: Author(s) reported no conflict of interest go to the local government (Kamer, 1983) and those having a mobile http://dx.doi.org/10.21511/pmf.09(1).2020.07 70 Public and Municipal Finance, Volume 9, Issue 1, 2020 source base must go to the State and Central government for ec ffi ient adminis tration and scrutiny. A solu - th tion to this problem is oe ff red by the 74 Constitutional Amendment Act (CAA) of India (Government of India, 1992). This amendment act provides a direction and lays down a frame work to strengthen the local government in all aspects. The local government may provide innovative way s and means in the produc - tion and provision of public goods. They may have the local solutions for local pr oblems. In this backdrop, the research paper investigates whether local governments have become ec ffi ient to per - form the functions and responsibilities assigned to them in Indian amend ment based on decentralization. What are the scrutinizing pattern followed by local level government and h ow self-sustaining they are? 1. LITERATURE REVIEW treating a place as urban in the 2011 census (GOI, 2011): Historical evidence suggests that the urbaniza - tion process is inevitable and universal. It is a pro - 1) All statutory towns, i.e. all places with munic - gressive concentration of the population in urban ipal corporations, municipal board, canton - units. Datta (2006) noted that urbanization is a ment board, notie fi d area, etc. process to switch from a spread-out pattern of hu - man settlements to one of concentration in urban 2) Census towns, which are non-statutory and are centers. He mentions three stages in the process of rural areas but satisfy the following criteria: urbanization: a) minimum population of 5000; 1) Stage one refers to a rural traditional society with predominance in agriculture and a dis - b) at least 75 percent of the male working persed pattern of settlements. population engaged in non-agriculture ac - tivities; and 2) Stage two refers to the acceleration stage where basic restructuring of the economy and c) a density of population of at least 400 per - investments in social overhead capitals, in - sons per sq. km. cluding transportation and communication th takes place. Here the proportion of the urban According to Mathur (2007), the 74 Constitutiona l population gradually increases from 25% to Amendment Act (CAA) 1992 on Municipalities, 40%, 50%, 60%, and so on, and the depend - is a path-breaking eo ff rt in achieving democrat - ence on the primary sector dwindles. ic decentralization in India. Before this, the local governments in India were organized based on 3) Stage three (terminal stage) – refers to the the ‘ultra vires’ principle [beyond the powers or stage where the urban population exceeds authority granted by law] and the state govern - 70% or more. At this stage, the level of urban - ments were free to extend or control the function - ization remains more or less the same or con - al sphere through executive decisions without an stant. Here the rates of growth of the urban amendment to the legislative provisions. As per th th population and total population become the the 12 Schedule of Article 243W of 74 CAA, same at this terminal stage. Urban Local Body should provide certain services and is entitled to certain powers (Mathur, 2007). th Urbanization is an irreversible process (Rao, 2008), e s Th ervices include (74 CAA, GOI, 1992): as ree fl cted in the case of India. India is now mov - ing towards the third stage of urbanization, while • Urban planning; the majority of the developed nations are into the third stage of urbanization. • Planning for economic and socia l development; In the modern era, according to an Indian defi - • Construction of roads and bridges and fire nition, the following criteria were adopted for service; http://dx.doi.org/10.21511/pmf.09(1).2020.07 71 Public and Municipal Finance, Volume 9, Issue 1, 2020 • Water supply for various purpose; Further, Ghuman and Mehta (2010) noted that the majority of the Urban Local Bodies across • Services like public health, sanitation, etc. the country are facing severe financial hardships and, hence, fail to provide adequate and quality The other services are the protection of the en - public services, including urban infrastructure to vironment, urban forestry, and promotion of their citizens. Moreover, water and sewerage – ba - ecological aspects; safeguarding the interests of sic services in India – are characterized by inade - weaker sections of society, including the hand - quate access, low level of services, and low custom - icapped and mentally retarded; slum improve - er satisfaction (Vaidya, 2003). ment and up-gradation and urban poverty alle - viation. Urban Local Bodies (ULBs) also provide To avoid this, the case study of Municipal Council urban facilities such as parks, gardens and play - Panchkula has been taken up by Ghuman and grounds, burials and burial grounds; cremation Mehta. They have taken the sample of 45 citizens grounds and electric crematorium, cattle pounds, from urban areas, 40 from villages (which fall prevention, vital statistics including registra - in the jurisdiction of the council), and 40 from tion of births and deaths. It also provides public slums/labor economies. The survey indicated that amenities. nearly 95 percent of the respondents were dissat - ise fi d with the quality of sanitation services and th However, the 74 Amendment Act provisions the contracted-out services are more accessible to are not applied to certain Scheduled Areas and the urban population followed by the rural popu - the Tribal Areas of India for example Meghalaya lation. Further, it was noted that local authorities and Mizoram. Yet, as noted by Mathur, in these succeed in getting the work done by the contrac - states, traditional municipal institutions (such as tors at the lowest costs, but the citizens sue ff r both municipal board, notiefi d area committee, etc.) on the account of inadequate supply of public ser - are functioning for the governance of urban areas. vices and their quality as urban local governments That said, due to diversity in geography and cul - normally go to passive mode once the municipal ture, the ee ff ct of legalizing the third layer of the services are contracted out. Hence, Ghuman and local urban institute is diverse . However, with rap - Mehta recommended that the State Governments id urbanization, Urban Local Bodies (ULBs) plays should provide adequate funds to local authorities. a signic fi ant role in India’s development (Bajwa, Alternatively, commercially viable projects can be 2008). These institutions are the instrument of en - developed (Vaida, 2003) by ULBs. However, Prest couraging local initiatives and harnessing them to (1960) suggested to bifurcate the activities, which creative channels (Singh, 1997). can be carried out by government and business sectors. Baxi (2019) noted that the economic contribu - tion, almost 60 percent of India’s GDP, comes Rao and Bird (2010) noted that India’s cities are from urban areas generating more than 75 % of large, economically important, and growing. the non-agriculture employment (Ministry of However, neither urban infrastructure nor the lev - Housing and Urban Poverty Alleviation, GoI, el of urban public services is adequate for current 2011). The urban cities are the hub of attracting in - needs. Rao and Bird suggest: vestment in various sectors and providing a wid - er market base and are considered as an engine of • e e Th xisting assignment system requires clar - economic growth. This poses greater challenges ity between various agencies delivering vari - for urban local government, particularly in terms ous services. of two important aspects, namely, to ensure effi - cient urban planning and ec ffi ient financial man - • e l Th argest cities should accord an independ - agement. Baxi highlighted the eight municipal ent status similar to the States in part to insu - corporations of Gujarat state and concluded that late them from localized and parochial biases. adequate fiscal power must be provided to mu - nicipal corporations to plan their local economic • e g Th overnance system in cities should pro - growth and development. mote cosmopolitanism and accommodative http://dx.doi.org/10.21511/pmf.09(1).2020.07 72 Public and Municipal Finance, Volume 9, Issue 1, 2020 policies to promote healthy social and eco - a highly urbanized state (Bhatt, 1984) and has an nomic interactions. increasing trend. According to the 2011 census (GOI, 2011), the Gujarat state is urbanized with • e c Th larity is required regarding the existing 42.1 percent (as against 37.35 percent in 2001). As definition of the role and functions of various administrative bodies such as urban local govern - institutions. ment, urban development, municipality, etc. sup - port the process of urbanization, the role of urban • e Th local level governance requires reforms for local bodies is very important. Today the state has city finance. 159 municipalities and eight municipal corpora - tions (as per the Bombay Municipal Act, 1949 and • e t Th ransfers from the central and state to ur - Gujarat Municipal Act, 1963). All the activities ban local governments require reforms. performed by these authorities are dependent on their finances. e Th refore, the focus of this study Development of Rurban centers with basic urban is to examine the finances of (ULBs) Urban Local amenities (in rural regions) can also address the Bodies in Gujarat. problem posed by urbanization ( Government of Gujarat , 2011). Further, Thakur (2006) noted that e l Th iterature review shows that Urban Local the financial health of an urban local body (ULB) Bodies (ULBs) now have legal status to grow in - is indicated by a set of closely interrelated factors dependently. This research study tried to examine and not merely on income-expenditure balance. the ee ff ctiveness of this decentralization. Further, Urban areas are known to contribute more than it is essential to examine that: sixty percent of national income. Yet in terms of resources, ULBs raise only 0.63 percent of national a) the average income and expenditure of de - income (GDP) from its typical public finance pat - veloped and developing urban local bodies tern to talk about own income of any municipality (ULBs) are similar; and resources for the year 2001–2002. b) the regional variation does not have any im - Another source is the grant. Municipal corpora - pact on the income and expenditure of ULBs. tions receive grants mostly from the state govern - ment. It has several roles, foremost of them is to 2. METHODS bridge the gap, since it is unlikely for the reve - nue-raising capacity of municipalities to perfect - ly match their expenditure needs. Thakur fur - e a Th nalysis of the finances of Urban Local Bodies in ther observed drawbacks in the budgeting sys - Gujarat has been undertaken from the historical per - tem of municipalities, as budget documents do spective. Gujarat is a heterogeneous state in terms of not contain physical or performance targets to economic and geographical parameters. This spatial be achieved through budget allocation. Hence no study was conducted to analyze the finances of se - achievements can be claimed by way of this budg - lected urban local bodies in Gujarat. The causal anal - etary expenditure. Hence, it is impossible to judge ysis was used to investigate the relationship between the financial health of municipalities. the financial position of municipalities concerning the total population as well as total income. Gujarat Urbanization in developing countries has a rich state is divided into v fi e major zones according to the and long history (Raju, 1997). The first phase of geographical classic fi ations (see Table 1). urbanization in the Indian sub-continent is asso - ciated with the Indus valley civilization, i.e. the e c Th riteria of developed and less developed mu - present-day state of Gujarat (Bhattacharya, 1979) nicipalities are adopted based on the classicfi a - and part of Pakistan. Gujarat, situated on the tion of municipalities according to the Indian west coast of India, is the seventh-largest state Constitution. Two zones namely, Saurashtra in the country in terms of area (1, 92022 sq. km) and North Gujarat (NG), are taken as samples. and tenth in terms of population (6.03 crores as Saurashtra has four municipal corporations, per 2011 census). It was observed that Gujarat is while North Gujarat has none. It is postulated that http://dx.doi.org/10.21511/pmf.09(1).2020.07 73 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table 1. Selected zones and districts of Gujarat Source: Gujarat State Portal. Zone District Central Ahmedabad, Kheda, Anand North Banaskantha, Patan, Mehsana, Sabarkantha, Gandhinagar South Godhra, Dahod, Bharuch, Narmada, Surat, Vadodara, Dang, Valsad, Navasari, Tapi Saurashtra Jamnagar, Rajkot, Porbandar, Junagadh, Amreli, Bhavnagar, Surendranagar Table 2. Selected municipalities and their specialty Class of Resides in the Municipality Population Specialty municipality district Jetpur I 1.18 Rajkot Industrial towns, fabric and exports of khanga and kitenge Vanthali IV 0.14 Junagadh Ghatapallava style step well, tourism Patan I 1.25 Patan Textile and mining industry, tourism Chanasama IV 0.15 Patan Gujarat industrial development corporation Note: Population is in lakhs, according to the 2011 census. RE CE YY+=βX+βεZ+ , Municipal Corporations with large populations, (3) id id id i id j ij larger resources, both physical and financial, and wider revenue-based help attain the benetfi s of where economies of scale. Four municipalities were se - RE d di RE lected as shown in Table 2. Y = YY + , where Y is the sum of reve - ij ij ij ij nue expenditure for developed municipalities Y ij di In this research paper, the multivariate analysis is and for developing municipalities Y ; ij also used to check the following hypotheses: CE d di CE Y YY+ , Y where is the sum of capital ij ij ij ij a) e a Th verage income (revenue and capital) of expenditure for developed municipalities Y and ij di developed municipalities is similar to that of developing municipalities Y ; ij developing municipalities. RI d di RI Y YY+ , where Y is the sum of reve - ij ij ij ij b) e a Th verage expenditure (revenue and capital) nue income in developed municipalities and ij di of developed municipalities is similar to that developing municipalities Y ; ij of developed municipalities. CI d di CI Y YY+ , where Y is the sum of capital ij ij ij ij c) eTh re is no dieff rence between the average income in developed municipalities Y and de - ij di capital expenditure of North Gujarat and veloping municipalities ; ij Saurashtra municipalities. RE NG S RE YY + Y , where Y is the sum of rev - ij id id ij NG d) eTh re is no dieff rence between the average enue expenditure in north Gujarat Y and id revenue expenditure of North Gujarat and Saurashtra municipalities Y ; id Saurashtra municipalities. CE NG S CE YY + Y , where Y is the sum of capital ij id id ij NG Financial analysis of developed and developing expenditure in north Gujarat Y and Saurashtra id municipalities: municipalities Y ; id RE CE YY+=βX+βεZ+ , (1) i = five-year period (from 2005–2006 to 2009– ij ij ij i ij j ij 2010), j = zone (1= north Gujarat region, 2= RY CY YY+=βX+βεZ+ . (2) Saurashtra region), d = devolvement criteria (de - ij ij ij i ij j ij veloped and developing municipalities), β = co- ij Financial analysis of north Gujarat and Saurashtra variance constant, X = developed municipalities th th region (of Gujarat): of i year, z = developing municipalities of i year, http://dx.doi.org/10.21511/pmf.09(1).2020.07 = Public and Municipal Finance, Volume 9, Issue 1, 2020 Source: Table A2 of the Appendix. Figure 1. Total income RE CE Y = Y = sum of revenue expenditure, sum e p Th attern of expenditure of urban local bodies ij ij of capital expenditure, Y = developed mu - reveals where its priorities lie. There is also a de - ij di nicipalities, Y = developing municipalities, tailed analysis of the trend in expenditure for four ij NG S Y = north Gujarat, Y = Saurashtra. municipalities. Total expenditure is divided into id id revenue and capital expenditure (Figures 2 and 3). e a Th nalysis is based on the secondary data ob - tained mainly from “yearly financial accounts” e Th capital expenditure mainly consists of the of municipalities (ULBs). The local government grant – tied or untied. eTh se funds depend on budget reefl cts the overall health of the local changing policies of central governments. Hence, economy and is the place where public scrutiny there is no clear trend for selected years. However, is focused. The period selected was 2005–2006 to Jetpur indicates sudden rise in year 2009–2010 2009–2010. The year 2005 was declared as “e Th due to capital grant under urban infrastructure Urban Year” by the Government of Gujarat. The development. Government provided special ‘Urban Year’ grants for urban infrastructure and services to various e c Th apital expenditure of any urban local body urban local bodies . To carry out a comparative consists only of the expenditure incurred from the analysis between two zones, multivariate analysis capital grants provided by a higher level of gov - is being used. ernment. The expenditure grants are divided in - to revenue grants and capital grants. The cost to perform various functions by urban local insti - 3. RESULTS AND DISCUSSION tutions requires larger funding, hence, a central and state government is required to support them To understand the financial health of urban local through the transfer of funds and grants. The to - bodies known as municipalities, the trend of in - tal revenue expenditure is divided into three major come and expenditure can be examined. Urban heads, namely tied, untied, and special (for under - Local Bodies in India are divided into two catego - standing it is presented as: administrative, social, ries (based on criteria of population namely) such socio-economical and economical). e Th grant of as Municipalities and Municipal Corporations. tied revenues is around 10 percent for developed municipalities and 23 percent for developing mu - 1 e im Th plementation and its effects can be observed only in later years. Hence, the next five years have (2005–2006 to 2009–2010) b een taken to understand the impact of allocated funds on the urban regions. http://dx.doi.org/10.21511/pmf.09(1).2020.07 75 Public and Municipal Finance, Volume 9, Issue 1, 2020 Source: Table A2 of the Appendix. Revenue 2005-06 2006-07 2007-08 2008-09 2009-10 1 Patan 2 Vanthali 3 Jetpur 4 Chanasama Figure 2. Revenue expenditure across municipalities in Gujarat Capital 2005-06 2006-07 2007-08 2008-09 2009-10 1 Patan 2 Vanthali 3 Jetpur 4 Chanasama Figure 3. Capital expenditure across municipalities in Gujarat nicipalities. This indicates developed municipali - streams based on economic activities such as a ties can cover their daily expenses from sources dairy business, a shop for cements, bolt and nut of revenue receipts. However, in case of major in - shops, etc. The purpose is to earn receipt, how - frastructure development, expenses are incurred ever, the cost, which was incurred for the same, from capital account. is considered under the heading of the economic expenditure. Table A1 of the Appendix provides details of total expenditure, which includes expenditure Out of the selected municipalities, the munic - grants too. The development of infrastructure ipality of Patan spent more than 46 percent on requires a capital grant. It is found that devel - infrastructure such as the construction of public oped municipalities generally spend more on amenities, i.e. public garden, hall, etc. (social ex - the construction of infrastructure (Table A1 of penditure), while Jetpur spent more than 29 per - the Appendix). cent of its expenditure on the development of ur - ban areas, including basic amenities like the de - In case of revenue expenditure, it was observed velopment of fire station, building a water tank, that ULBs have certain revenue generation etc. (socio-economical). The developing munici - http://dx.doi.org/10.21511/pmf.09(1).2020.07 76 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table 3. Distribution of revenue expenditure Source: Budgets of various municipalities, 2005–2006 to 2009–2010. As % to As % to As % to As % to Municipality/ Socio- Administrative total Social total total Economic total Years Economic expenditure expenditure expenditure expenditure Chanasama 2005–2006 210,4401 6.00 1,863,929 5.3 1,555,160 4.44 626,353 17.87 2006–2007 1,441,982 7.25 1,679,411 8.4 2,060,659 10.36 562,845.04 28.3 2007–2008 1,557,143 5.44 2,571,848 9.0 1,996,388 6.97 10,107,539 35.29 2008–2009 2,551,746 6.88 3,055,890 8.2 2,628,696 7.08 10,031,800 27.04 2009-2010 1,405,695 5.83 2,149,911 8.9 2,471,096 10.25 11,033,356 45.77 Patan 2005–2006 13,089,166 7.24 9,395,345 5.2 54,851,294 30.33 3,080,857 1.7 2006–2007 14,437,567 11.93 7,486,055 6.2 57,992,319 47.90 2,608,807 2.15 2007–2008 14,320,845 9.97 9,318,269 6.5 70,532,444 49.08 2,758,772 1.92 2008–2009 14,292,929 10.86 7,014,774 5.3 78,507,339 59.63 3,147,442 2.39 2009-2010 18,946,882 10.26 8,843,860 4.8 96,061,218 52.04 2,881,573 1.56 Vanthali 2005–2006 2,040,500 11.95 350,000 2.1 3,390,000 19.86 N.A N.A 2006–2007 1,856,213 13.94 241,167 1.8 3,810,318 28.61 N.A N.A 2007–2008 4,519,000 32.40 160,000 1.1 1,820,000 13.05 N.A N.A 2008–2009 2,978,309 17.40 355,728 2.1 5,907,133 34.52 N.A N.A 2009-2010 3,236,225 14.75 725,278 3.3 5,837,064 26.61 N.A N.A Jetpur 2005–2006 9,904,201 9.78 10,187,184 10.1 38,223,411 37.76 N.A N.A 2006–2007 8,517,531 9.07 7,646,908 8.1 36,992,829 39.40 N.A N.A 2007–2008 10,669,733 6.95 8,411,676 5.5 53,470,149 34.82 N.A N.A 2008–2009 10,265,741 7.97 8,220,215 6.4 56,758,582 44.06 N.A N.A 2009-2010 10,166,513 2.64 9,756,026 2.5 67,075,396 17.40 N.A N.A Note: This table does not include capital expenditure and, therefore, the total shall not add up to 100; The revenue expenditure is indicated as a percentage of total expenditure. N.A. indicates data is not available. palities like Chanasma and Vanthali spent more case of developed municipalities, such as Patan, than 20% on infrastructure development. the expenditure on water (SE) is around 20 per - cent, while Jetpur has the highest expenditure e t Th rend in expenditure pattern shows the focus on solid-waste management (SE), followed by ex - area of development by municipalities. In the case penditure on water (SE) and streetlight (SE). In of developed municipalities, the center point is so - the case of developing municipalities such as cio-economic development. Chanasma, the highest expenditure is on street lights, followed by water and solid-waste manage - Hence, the local government of urbanized states ment. For Vanthali, the highest expenditure is on such as Gujarat must focus on the development of solid waste management and streetlights. Notably, infrastructure and services resulting in the high - Gujarat has a major urban region with zero-waste est allocation for the socio-economical sector. This urban regions and the availability of potable water. does include essential goods like water and public construction works. Moving further, the state government is termed as a welfare government; hence it is essential to Appendix A (Table A1) provides the overall dis - perform functions that lead to positive external - tribution of total expenditure, while the revenue ities in society. o Th se functions are called ‘social expenditure has been presented in Table 3. In the functions’ in the municipal budget. The expend - 2 a) Total expenditure is divided into revenue expenditure and capital expenditure. Revenue expenditure (sa lary expenditure, water expenditure, cost on solid waste management, etc.) is further divided into various activities. b) Categories such as administrative expenditure, social expenditure, economic expenditure, socio-economic expen diture, and revenue grants expenditure. Capital expenditure consists of only capital grant expenditure, etc., most o f which is based on state government budget classification. http://dx.doi.org/10.21511/pmf.09(1).2020.07 77 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table 4. Distribution of total income (in %) Source: Budgets of various municipalities, 2005–2006 to 2009–2010. Municipality/ Own Municipality/ Grants Others Own income Grants Others Years income Years Patan Chanasama 2005–2006 59.4 19.57 21.03 2005–2006 44.16 50.79 5.05 2006–2007 58.64 27.54 13.82 2006–2007 49.34 46.1 4.56 2007–2008 54.21 36.29 9.51 2007–2008 48.38 49.13 2.49 2008–2009 68.8 17.71 13.5 2008–2009 42.77 57.08 0.15 2009–2010 66.85 26.28 6.87 2009–2010 67.2 29.47 3.33 Jetpur Vanthali 2005–2006 17.29 60.5 22.21 2005–2006 13.5 83.6 2.9 2006–2007 17.61 68.85 13.54 2006–2007 39.52 55.61 4.86 2007–2008 14.13 70.85 15.02 2007–2008 35.65 61.41 2.94 2008–2009 24.78 57.8 17.42 2008–2009 36.78 55.43 7.79 2009–2010 13.76 71.39 14.86 2009–2010 71.2 19.47 9.33 iture on social function is hardly five percent of and developed. This indicates a reduction in the total expenditure in selected municipalities. In financial ability of the local bodies, since the de - the case of developing municipalities, it is, by and pendency on the grants is higher (Table A2 of the large, in single-digit only. Oates (1972), in his book Appendix). ‘Fiscal Federalism’, pointed out that the establish - ment of any layer of government itself incurs the Distribution of total revenue by own income and cost, namely the cost of establishment and mainte - other income: Total revenue income is divided into nance. Ree fl cting that the onerous expenditure, i.e. income earned through own sources and income administrative expenditure of almost all munici - through other sources. Other sources of income palities, is around 10 percent of total expenditure. in urban local bodies consist of loans, advances, Although there is no specic t fi rend, it is interest - deposits, and miscellaneous. ing to note that in the case of developed munic - ipalities, Patan, with 42 percent, has the highest Own income of municipalities consists of tax in - growth rate of administrative expenditure. come, non-tax income, and income from oth - er miscellaneous sources such as town planning e r Th evenue account consists of revenue receipts and funds, auction of old furniture or storeroom items, capital receipts. Revenue receipts of municipalities vehicles, etc. The share of tax and non-tax income include current (yearly) income from various sourc - as a percentage of total own income is presented es such as own-income, revenue grants, others. The in Table A2 of the Appendix. In general, the de - trend is depicted in Table A2 of Appendix. Moreover, veloped municipalities of Patan indicate the share the revenue account growth is overall positive for the of tax income is great than non-tax income due developed municipality except for one year in the to higher shares of property tax and water tax. case of Patan. The growth rate (CAGR) for the de - However, in the case of Jetpur, the share of non-tax veloped municipalities such as Patan and Jetpur are is higher compared to tax revenue due to a high - 0.06, and 0.20, respectively. The developing munic - er share of non-tax income like fees, including li - ipalities also indicate promising growth rates. For cense fees, notice fees, property transfer fees, shop example, Chanasma and Vanthali indicate overall registration fees, etc. In the case of developing mu - growth, except for one year. nicipalities, except Vanthali, the major share of revenue comes from non-tax income. Vanthali has e c Th apital income consists of mainly grant in - a major share of income from property tax; and, it come, hence some variations in the trends are ex - was octroi too till the year 2006–2007. The major pected. For example, Jetpur has a negative growth share in non-tax revenue income is from miscella - rate for one year. The developing municipalities al - neous non-tax income in the case of Chanasama. so have negative growth rates for at least two years. e Th income from grants is greater than the own e d Th eveloped municipalities received a major income in all selected municipalities, developing share of the grants in their capital accounts as http://dx.doi.org/10.21511/pmf.09(1).2020.07 78 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table 5. Deficits in budget (Rs. in crores) Source: Calculated from income and expenditure of various municipal budgets. Municipality/ Municipality/ TD RD KD TD RD KD Years Years Patan Chansama 2005–2006 –1.07 2.31 –3.37 2005–2006 –1.27 –0.02 –1.23 2006–2007 0.99 –0.54 1.54 2006–2007 0.16 0.01 0.14 2007–2008 2.51 –0.32 2.79 2007–2008 0.21 –0.2 0.43 2008–2009 0.55 –0.02 0.56 2008–2009 –0.25 –0.25 –0.01 2009–10 0.88 0.11 0.77 2009–10 0.22 0.12 0.09 Jetpur Vanthali 2005–2006 0.12 –0.92 –4.97 2005–2006 0.01 – 0.24 0.24 2006–2007 3.12 0.03 –2.55 2006–2007 0.008 –0.02 0.02 2007–2008 3.49 0.16 –4.74 2007–2008 –0.066 –0.13 0.24 2008–2009 3.41 0.64 2.77 2008–2009 0.908 –0.05 0.79 2009–10 –6.35 1.26 –7.6 2009–10 –0.54 0.21 – 0.75 Note: TD = Total deficit, RD = Revenue deficit, CD = Capital deficit. shown in Table A2 of Appendix. However, reve - urban local government that indicates the planning nue grants contributed marginally to the total in - and priorities of an urban local government. come of the selected municipalities. In the case of Patan and Jetpur, the income from capital grants Table 5 provides detailed information on various contributed the highest to their total income from dec fi it parameters. The municipality-wise analysis grants. Even in the case of capital grants, urban is presented below. development and miscellaneous grants are major contributory factors for Jetpur municipality. In to - e P Th atan municipality indicates an overall defi - tal capital grants for Patan municipality, the share cit for the first year (2005–2006) of the study, fol - of infrastructure development is a major one. The lowed by a surplus in the next year (2006–2007). grants to the own income ratio indicates the de - e d Th ec fi it is due to higher capital expenditure on pendency ratio of urban local government, which public amenities. The revenue account indicates a is highest for Patan. surplus for the first year followed by a dec fi it for the next two years, i.e. 2006–2007 and 2007–2008. e g Th rant helps to reduce horizontal equity, as This indicates overall higher administrative and each municipality has diverse abilities, as well as socio-economic expenditure. The capital account a tax base to augment income. In the case of de - indicates a dec fi it for the year 2005–2006, followed veloped municipalities such as Patan and Jetpur, by a surplus for the next four years of the study. their income constitutes the major source of rev - e d Th ec fi it budget in the Patan municipality is on - enue, indicating that local government bodies ly for the financial year 2005–2006. e Th capital ac - have strengthened their revenue base. In contrast, count faced a dec fi it due to larger spending by mu - grants are the major source of revenue for devel - nicipalities for the construction of infrastructure oping municipalities. The source of revenue is such as a public hall. presented in Table 4. The detailed distribution of revenue income by own income and others is de - The overall budget of the Jetpur municipality picted in Table A2 of the Appendix. indicates a surplus except for the last year of the study, i.e. 2009–2010. The revenue account in - e t Th otal dec fi it depicts the gap between income and dicates a surplus for the first year of the study. expenditure of municipalities. Here is an attempt to The surplus indicates a higher contribution analyze revenue and capital dec fi it. The budget of from non-tax income. Moreover, sanitation tax an urban local body is a financial statement of the and streetlight fee contributions lead to a sur - http://dx.doi.org/10.21511/pmf.09(1).2020.07 79 Public and Municipal Finance, Volume 9, Issue 1, 2020 plus in the revenue account. In the case of the 2006 and 2008–2009 due to a deficit in both capital account, there is a deficit for all the five revenue and capital account. In 2009 – 2010, years of the study except 2008–2009. The cap - there is a reduction in capital grants (income), ital (grant) expenditure is found to be increas - while spending remains unchanged leading to a ing. In the case of developed municipalities, the deficit in the capital account. However, its ‘own adequate revenue in the budget provides better funds’ are utilized to continue constructional services, hence, it has a comparatively stronger activities that lead to a deficit in the revenue fiscal position. This helps to create basic infra - account. The Vanthali municipality indicates structure and public places in the city. Big cities an overall surplus for the first two years of the (Class A type city) provide employment oppor - study, followed by a deficit in the year 2007– tunities and, therefore, attract the population 2008 and then a surplus again in 2008–2009. from nearby rural and semi-rural regions. It The capital account indicates a surplus in the thus reduces the financial pressure of the mu - budget, except the year 2009–2010, due to the nicipal corporation of the district, i.e. Rajkot. reduction of grants received from a higher layer The detail of total income, expenditure, as well of government. The revenue account indicates as revenue and capital income, expenditure is a deficit in the year 2007–2008 due to high ad - indicated in the Appendix (Tables A1 and A2). ministrative costs. A quantitative analysis is at - tempted to understand the nature and degree of The first year indicates a deficit budget for dependency of municipalities on various sourc - Chanasma, followed by a surplus for the next es of revenues. two years of the study. However, 2009–2010 in - dicates a deficit in the overall budget of the mu - A multivariate analysis (MANOVA) is carried nicipality. The first year of the study indicates out to understand the dynamics of revenue and a deficit in the revenue account, followed by a expenditure of the two zones such as Saurashtra surplus. Again, the years 2007–2008 and 2008– and North Gujarat. An attempt is made to un - 2009 indicate a deficit followed by a surplus in derstand whether or not the different compo - the account. The capital account of the munici - nents of the municipal budget, such as expend - pality has a deficit for the first year of the study, iture, income, and deficit, component of in - followed by a surplus in the account for the next come and component of expenditure, etc., differ two years. The year 2008–2009 indicates defi - significantly between the regions and types of cit, but once again the year 2009–2010 indicates municipalities. The models for testing have an surplus in the capital account. Chanasma mu - equation for each model. The postulation is that nicipality indicates a deficit for the years 2005– there is no significant difference between mu - Table 6. Revenue and capital expenditure of developed and developing municipalities Revenue expenditure Mean Sample size (N) F-ratio Developed 8.66 10 Municipalities Developing 104.29* 1.378 10 Municipalities Total 5.019 20 Intercept 198.17* Capital expenditure Mean Sample size (N) F-ratio Developed 7.241 10 Municipalities Developing 7.50** 0.825 10 Municipalities Total 4.033 20 Intercept 11.86* R Squared .853 (Adjusted R Squared = .845) Note: * represents the 1% level of significance, and ** represent the 5% level of significance. http://dx.doi.org/10.21511/pmf.09(1).2020.07 80 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table 7. Revenue and capital income of developed and developing municipalities Revenue income Mean Sample size (N) F-ratio Developed municipalities 8.93 10 Developing municipalities 1.32 10 93.01* Total 5.13 20 Intercept 168.8* Capital income Mean Sample size (N) F-ratio Developed municipalities 5.76 10 Developing municipalities 0.82 20 11.08** Total 3.29 10 Intercept 19.67* R Squared .838 (Adjusted R squared = .829) Note: * represents the 1% level of significance, and ** represent the 5% level of significance. Table 8. Municipalities of North Gujarat and Saurashtra Revenue expenditure Mean Sample size (N) F-ratio North Gujarat 10.0060 5 Saurashtra 7.3140 5 6.21* Total 8.6600 10 Intercept 257.01* Capital expenditure Mean Sample size (N) F-ratio North Gujarat 2.9760 5 Saurashtra 11.5060 5 4.71** Total 7.2410 10 Intercept 13.56* R Squared .437 (Adjusted R Squared = .367) Note: * represents the 1% level of significance, and ** represent the 5% level of significance. nicipalities of these two regions, and also across developing municipalities. Higher administrative developed and developing municipalities. The and socio-economic costs lead to higher revenue result and analysis of MANOVA Equation 1 in - expenditure of developed municipalities. Overall, dicate expenditure (revenue and capital) of de - development, especially infrastructure, indicates veloped and developing municipalities (Table 6). higher capital spending for developed municipali - Table 7 highlights the result for MANOVA. ties. Almost 85 percent of the variation in revenue Equation 2 indicates the revenue and capital and capital expenditure of developing and devel - income of developed and developing munici - oped municipalities is explained by the model. It palities. The MANOVA results of inter-zonal indicates that the growth of a region is backed by comparison of municipalities of north Gujarat higher expenses. and municipalities of Saurashtra as indicated in Equation 3 are provided in Table 8. Table 7 shows that the average revenue income and the average capital income of developed municipal - Table 6 shows that the average revenue expenditure ities are much higher than the developing munici - and the average capital expenditure of developed palities. This is due to a higher share of their own in - municipalities are much higher than the develop - come in their budget when an average remain high. ing municipalities. All four tests signicfi ant and All four tests are signic fi ant and display F-values. display F-values. There is a signic fi ant die ff rence e Th re is a signic fi ant die ff rence between the aver - between the average revenue expenditure and the age revenue income and the average capital income average capital expenditure between developed and between developed and developing municipalities. http://dx.doi.org/10.21511/pmf.09(1).2020.07 81 Public and Municipal Finance, Volume 9, Issue 1, 2020 Almost 83.8 percent of the variation in revenue and er than the municipalities in North Gujarat. capital income of developing and developed munic - However, in the case of revenue expenditure, ipalities is explained by the model. the average of North Gujarat is higher than Saurashtra. The investment in infrastructure Tables 6 and 7 indicate that the growth of an ur - further enhances the overall development. The ban region is backed by higher expenses both on capital expenditure indicates investment in revenue and capital budget. However, it is support - various long-term projects that are expected to ed by higher income, especially partially the own provide higher returns in the future. However, funds. This is noteworthy that developed munici - greater revenue expenditure indicates a higher palities in both the regions attempt to augment the ‘exhaustive spending’ that does not lead to any financial resources for continuous development. return in the future. All four tests of signifi - However, the regional variation must be taken in - cance display ‘F-value’ results in rejection of the th to consideration. The purpose of the 74 CAA is to null hypothesis and establish that there is a sig - serve as overall dependency has reduced. Though nificant difference between the average of rev - the scenario is die ff rent for developed and develop - enue expenditure and mean of capital expend - ing municipalities. iture between North Gujarat and Saurashtra. Almost 44 percent of the variation in revenue Table 8 shows that the average capital expend - and capital expenditure of North Gujarat and iture of municipalities in Saurashtra is high - Saurashtra is explained by the model. CONCLUSION Urbanization is an essential criterion to scrutinize the growth of soci ety. Many urban problems th that cannot be handled at the center or state level could be best handled at the local l evel. The 74 Constitutional Amendment Act (CAA) in 1992 was promulgated to promote de centraliz ation and th th strengthen the grass-root level governance. As per the 12 schedule of Article 243W of 74 CAA, ULB should provide basic urban amenities. This calls for fiscal au tonomy along with functional responsi - bilities. Overall dependency has reduced. Although, the municipali ty with better financial resources and economic opportunity stands to gain more compared to the smaller one. The s cenario has not changed even today in 2020. The higher layer of the government must guide these l ocal units in de - veloping economically viable projects. However, the higher capital deficit of Jetpur indicates that infrastru cture expenditure is increasing tremendously, indeed thanks to rising employment opportunities in th e region. Hence, the con - centrations of municipal corporations in the Saurashtra zone indica te higher investment in infra - structure and capital-related activities. However, both zones mus t invest heavily in e-government, environmental issues such as solid-waste, and focus on the redu ction of the deficit. This also high - lights the fact that municipalities in peripheral regions of major urban ce nters tend to get benefits. Increases in revenue expenditure need to be controlled for the ec ffi ient us ages of available resources, in particular administrative costs, by adopting the technology. Ec ffi ient and technical staff is required. Municipalities are required to generate new and innovative sources of i ncome to cover the increasing expenditure; however, for this, the understanding of the region is impo rtant. The sta, i ff ncluding the chief oc ffi er, must be appointed from the local area for a better understandi ng of the economic and social aspects of the region. Thus, municipalities can generate funds fro m the public for various social purposes. A local-level economic model will help. It has been observed that m ost local institutions fol - low the national model, changes are needs to reduce the dependency and explo re the regionally available talent and resources. http://dx.doi.org/10.21511/pmf.09(1).2020.07 82 Public and Municipal Finance, Volume 9, Issue 1, 2020 AUTHOR CONTRIBUTIONS Conceptualization: Forum Dave. Data curation: Forum Dave. Formal analysis: Forum Dave. Investigation: Forum Dave. Methodology: Forum Dave. Project administration: Forum Dave. Writing – original draft: Forum Dave. Writing – review & editing: Forum Dave. REFERENCES 1. Bajwa, S. G. (2008). Chandigarh Council Panchkula. Nagarlok, 15. Musgrave, R. A., & Musgrave, P. B. Municipal Reforms, a requisite XLII(1), 50-68. Retrieved from (1973). Public Finance in Theory in milieu of emerging urban and Practice. McGraw- Hill https://www.researchgate.net/ problems. Nagarlok, XL(3), Indian International. 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Singh, U. B. (2005). Urban an overview. National Institute ta, A. (2010). Privatization Mizoram: Perspectives for of Urban Affairs, New Delhi. of Public Services by Urban Initiating Modern Local Retrieved from https://www.eldis. Local Governments in India: Government. Nagarlok, org/document/A38582 a Case Study of Municipal http://dx.doi.org/10.21511/pmf.09(1).2020.07 83 Public and Municipal Finance, Volume 9, Issue 1, 2020 XXXVII(1), Indian Institute of Haryana. Nagarlok, XXXIX, 26. Urban Profile of Local Govern - Indian Institute of Public Public Administration, New ment. Retrieved from https:// Administration, New Delhi. Delhi. nios.ac.in/media/documents/ srsec317newE/317EL16.pdf 24. Urban Profile of Ancient 22. Sodhi, I. Sing. (2004). Challenge Dwaraka City. Retrieved from and Prospects of Urbanization- 27. Vaidya, C. (2003). Private Sector http://www.drs.nio.org/drs/ Need For Better Approach and Participation in Urban Water bit stream/2264/3602/I/man_ Supply and Sanitation Sector In Strategy. Nagarlok, XXXVI(2), environ_34_72a.pdf India. Financial Issues in Water Indian Institute of Public Sectors, Published by Sardar Administration, New Delhi. 25. Urban Profile of Gujarat state. Patel Institute of Economic and Retrieved from http://www. 23. Subhash, C. A., & Prabhakar, Social Research. gujaratindia.com/state-profile/ R. K. (2007). Post-74th govt-department.htm Amendment Scenario in http://dx.doi.org/10.21511/pmf.09(1).2020.07 84 Public and Municipal Finance, Volume 9, Issue 1, 2020 APPENDIX A Table A1. Total expenditure (Rs in Lakhs) Patan 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Administrative 130.89 144.38 143.21 142.93 189.47 as % of total expenditure 7.24 11.93 9.97 10.86 10.26 Economical 30.81 26.09 27.59 31.47 28.82 as % of total expenditure 1.7 2.15 1.92 2.39 1.56 Others 5.37 4.32 3.93 5.58 6.33 as % of total expenditure 0.3 0.36 0.27 0.42 0.34 Social 93.95 74.86 93.18 70.15 88.44 as % of total expenditure 5.19 6.18 6.48 5.33 4.79 Socio-economical 548.51 579.92 705.32 785.07 960.61 as % of total expenditure 30.33 47.9 49.08 59.63 52.04 Revenue grants 1.97 1.17 1.64 3.96 7.21 as % of total expenditure 0.11 0.1 0.11 0.3 0.39 Capital grants 610.24 146.46 243.52 134.74 353.08 as % of total expenditure 33.74 12.1 16.95 10.23 19.13 Total grants 612.2 147.63 245.16 138.7 360.29 as % of total expenditure 33.85 12.19 17.06 10.54 19.52 Total capital expenditure 610.24 146.46 243.52 134.74 353.08 Loans 3.95 20.45 17.71 4.56 18.98 as % of total expenditure 0.22 1.69 1.23 0.35 1.03 Extra 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Deposits 193.52 181.89 175.75 94.67 138.07 as % of total expenditure 10.7 15.02 12.23 7.19 7.48 Advance 189.53 31.08 25.22 43.41 54.88 as % of total expenditure 10.48 2.57 1.75 3.3 2.97 Total expenditure 1808.74 1210.62 1437.07 1316.54 1845.89 Vanthali 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Administrative 20.41 18.56 45.19 29.78 32.36 as % of total expenditure 11.95 13.94 32.4 17.4 14.75 Economical 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Others 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Social 3.5 2.41 1.6 3.56 7.25 as % of total expenditure 2.05 1.81 1.15 2.08 3.31 Socio-economical 33.9 38.1 18.2 59.07 58.37 as % of total expenditure 19.86 28.61 13.05 34.52 26.61 Revenue grant 1.24 6.87 4.16 4.55 3.6 as % of total expenditure 0.73 5.16 2.98 2.66 1.64 Capital Grants 108.75 64.11 64.4 53.77 88.62 as % of total expenditure 63.71 48.13 46.18 31.42 40.39 Total grants 109.99 70.98 68.56 58.31 92.22 as % of total expenditure 64.43 53.29 49.16 34.08 42.03 Total Capital Expenditure 108.75 64.11 64.4 53.77 88.62 Loan 0 0 20 0 0 as % of total expenditure 0 0 1.43 0 0 Extra 0 1.67 1.61 2.03 0 as % of total expenditure 0 1.20 0.89 0.92 0 Deposits 1.71 0.59 1.56 5.2 21.98 as % of total expenditure 1 0.44 1.11 9.35 10.02 Advance 1 2.42 0 2.31 0.51 as % of total expenditure 0.59 1.82 0 1.35 0.23 Total expenditure 170.71 134.73 156.72 160.27 212.69 http://dx.doi.org/10.21511/pmf.09(1).2020.07 85 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table A1 (cont.). Total expenditure (Rs in Lakhs) Jetpur 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Administrative 99.04 85.18 106.7 102.66 101.67 as % of total expenditure 9.78 9.07 6.95 7.97 2.64 Economical 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Others 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Social 101.87 76.47 84.12 82.2 97.56 as % of total expenditure 10.06 8.14 5.48 6.38 2.53 Socio-economical 382.23 369.93 534.7 567.59 670.75 as % of total expenditure 37.76 39.4 34.82 44.06 17.4 Revenue grant 1.83 4.23 10.77 8.24 25.43 as % of total expenditure 0.18 0.45 0.7 0.64 0.66 Capital grants 216.59 220.34 451.55 326.65 2566.31 as % of total expenditure 21.4 23.47 29.41 25.36 66.56 Total grants 218.43 224.57 462.32 334.89 2591.74 as % of total expenditure 21.58 23.92 30.11 26 67.22 Total capital expenditure 216.59 220.34 451.55 326.65 2566.31 as % of total expenditure 0.04 0.53 0.01 0.12 0.01 Loan 15.69 23.08 69.68 12.1 16.4 as % of total expenditure 1.55 2.46 4.54 0.94 0.43 Extra 116.71 70.01 120.98 38.4 66.92 as % of total expenditure 11.53 7.46 7.88 2.98 1.74 Deposits 48.02 45.17 37.52 13.18 173.12 as % of total expenditure 4.74 4.81 2.44 1.02 4.49 Advance 29.99 39.48 119.33 135.6 137.23 as % of total expenditure 2.96 4.21 7.77 10.53 3.56 Total expenditure 1011.97 933.89 1535.35 1286.62 3855.39 Chanasama 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Administrative 21.04 14.42 15.57 25.52 14.06 as % of total expenditure 14.57 9.73 6.49 11.35 6.41 Economical 62.64 56.28 101.08 100.32 110.33 as % of total expenditure 17.49 27.65 34.33 26.77 44.14 Others 0 0 0 0 0 as % of total expenditure 0 0 0 0 0 Social 18.64 16.79 25.72 30.56 21.5 as % of total expenditure 5.32 8.45 8.98 8.24 8.92 Socio-economical 15.55 20.61 19.96 26.29 24.71 as % of total expenditure 4.44 10.36 6.97 7.08 10.25 Revenue Grant 1.02 2.87 8.67 0.07 0.51 as % of total expenditure 0.29 1.44 3.03 0.02 0.21 Capital Grants 200.3 44 39.46 142 19.87 as % of total expenditure 57.13 22.12 13.78 38.27 8.24 Total Grants 201.32 46.86 48.13 142.07 20.38 as % of total expenditure 57.42 23.57 16.8 38.29 8.46 Total capital expenditure 201.32 46.86 48.13 142.07 20.38 Loan 1.47 2.48 19.82 0 9.64 as % of total expenditure 0.42 1.25 6.92 0 4 Extra 5.23 5.06 3.81 4.3 1.33 as % of total expenditure 1.49 2.54 1.33 1.16 0.55 Deposits 0.23 1.15 0.87 0 0.39 as % of total expenditure 0.07 0.58 0.3 0 0.16 Advance 0.39 0.49 2.2 0 0 as % of total expenditure 0.11 0.25 0.77 0 0 Total expenditure 326.51 164.15 221.59 329.06 202.34 http://dx.doi.org/10.21511/pmf.09(1).2020.07 86 Public and Municipal Finance, Volume 9, Issue 1, 2020 Table A2. Total income (Rs. In lakhs) Patan 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Own income 992.49 746.32 888.81 948.90 1,249.98 As % to total income 59.40 58.64 54.21 68.80 66.85 Grants 326.94 350.58 595.01 244.20 491.36 As % to total income 19.57 27.54 36.29 17.71 26.28 Loan 0.00 0.00 0.00 40.00 0.00 As % to total income 0.00 0.00 0.00 2.95 0.00 Advance 173.77 32.03 42.28 56.76 60.81 As % to total income 10.40 2.52 2.58 4.12 3.25 Deposits 177.67 143.82 113.59 89.38 67.64 As % to total income 10.63 11.30 6.93 6.48 3.62 Extra 0.00 0.00 0.00 0.00 0.00 As % to total income – – – – – Total income 1670.9 1272.8 1639.7 1379.2 1869.8 Chanasama 2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 Own income 98.90 105.79 148.65 146.07 175.44 As % to total income 44.16 49.34 48.38 42.77 67.20 Grants 113.74 98.86 150.94 194.95 76.93 As % to total income 50.79 46.10 49.13 57.08 29.47 loan 5.71 3.01 1.77 1.50 9.03 As % to total income 2.55 1.41 0.58 0.44 3.43 Advance 0.39 0.49 0.70 0.00 0.00 As % to total income 0.17 0.23 0.23 0.00 0.00 Deposit 0.26 1.16 0.86 0.01 0.40 As % to total income 2.55 1.41 0.58 0.44 3.43 Extra 4.94 5.11 4.31 0.00 1.27 As % to total income 2.20 2.38 1.40 0.00 0.48 Total income 223.9 214.4 307.2 342.5 263.1 Jetpur 2005–2006 2006–2007 2007–2008 2008–2009 2009-2010 Own income 182.08 220.65 265.11 411.59 455.95 As % to total income 17.29 17.61 14.13 24.78 13.76 Grants 636.91 862.53 1329.22 960.18 2366.17 As % to total income 60.50 68.85 70.85 57.80 71.39 loan 11.11 12.47 12.29 70.15 21.47 As % to total income 1.06 1.00 0.66 4.22 0.65 Advance 20.68 15.36 116.22 117.67 124.80 As % to total income 1.96 1.23 6.19 7.08 3.77 Deposit 80.93 56.64 31.21 31.02 256.98 As % to total income 7.69 4.52 1.66 1.87 7.75 Extra 121.10 85.11 122.12 70.56 89.18 As % to total income 11.50 6.79 6.51 4.25 2.69 Total income 1052.8 1252.8 1876.2 1661.2 3314.5 Vanthali 2005–2006 2006–2007 2007–2008 2008–2009 2009-2010 Own income 23.45 54.22 53.98 92.39 116.60 As % to total income 13.50 39.52 35.65 36.78 71.20 Grants 145.13 76.30 92.98 139.25 31.88 As % to total income 83.60 55.61 61.41 55.43 19.47 loan 0.10 0.00 0.60 3.29 5.38 As % to total income 0.06 0.00 0.40 1.31 3.28 Advance 1.00 2.37 0.00 2.42 0.73 As % to total income 0.58 1.73 0.00 0.96 0.45 Deposit 0.83 1.77 1.20 11.46 4.63 As % to total income 0.48 1.29 0.79 4.56 2.83 Extra 3.10 2.54 2.65 2.40 4.55 As % to total income 1.79 1.85 1.75 0.96 2.78 Total income 173.6 137.2 151.4 251.2 163.8 http://dx.doi.org/10.21511/pmf.09(1).2020.07

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