Shifting Gears: Municipal Corporations Focus on Capital Expenditure
Municipal Corporations in India are shifting their focus towards capital expenditure
India's Municipal Corporations (MCs) are aligning their expenditure patterns with the Central government, prioritizing capital expenditure to drive revenue generation and wealth creation.
The Reserve Bank of India's (RBI) Report on Municipal Finances offers a comprehensive analysis of the financial health of municipal corporations in India.
According to the report, in 2023-24, MCs allocated 61.5% of their total expenditure towards capital spending, primarily on fixed assets and capital work-in-progress as compared with 24.8% and 21.4% for State governments and the Central government, respectively (BE) during the same time.
It is noteworthy that the total expenditure of Municipal Corporations (MCs) is relatively modest compared to State governments and the Central government.
In 2023-24, MCs' total expenditure accounted for 1.3% of GDP, whereas State governments and the Central government accounted for 16.3% and 15.1%, respectively.
The ratio of capital expenditure to total expenditure for Municipal Corporations (MCs) exhibits significant inter-state variations. Notably, in 2023-24 (BE), the share of capital expenditure exceeded 50% in several states, including Jharkhand, Uttar Pradesh, Maharashtra, Tamil Nadu, Odisha, Bihar, Andhra Pradesh, and Telangana.
The ratio of revenue expenditure to capital expenditure, a key indicator of the quality of government spending, stood at 0.63 for Municipal Corporations (MCs) in 2023-24 (BE). This contrasts with the Central government's ratio of 3.7 and the State governments' ratio of 3.0.
The all-India per capita capital expenditure by Municipal Corporations (MCs) was budgeted at ₹11,532 for 2023-24, representing a 10.5% annual average growth from ₹8,547 in 2020-21. Notably, Maharashtra, Uttar Pradesh, and Tamil Nadu exceeded the national average in per capita capital spending by MCs during 2023-24.
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