India is witnessing rapid urbanization. The urban population has grown fivefold since 1947 and some 27 percent of India’s people now live in urban areas. Increasing urbanization has meant that most urban settlements face shortfalls in housing and water supply, inadequate sewerage, congested traffic and pollution. To help urban local bodies (ULB) meet these and other growing challenges, the central government’s Jawaharlal Nehru National Urban Renewal Mission (JNNURM) is giving a fresh impetus for urban reform.  As the infusion of funds from the JNNURM is expected to increase municipal budgets seven or eight fold, it is important that ULBs have sound systems and procedures in place to ensure that these public funds are used efficiently and transparently.

The new World Bank report ‘Synthesis Study of Public Financial Management and Accountability in Urban Local Bodies’ evaluates the PFMA environment in ULBs and highlights a number of success stories in budgeting, financial planning and procurement. It outlines innovative practices adopted by various states such as Karnataka, Andhra Pradesh and Kerala. For instance, the small town of Kapra in Andhra Pradesh uses budgets for long term strategic planning, Kerala promotes citizens’ participation in planning; and in Karnataka the PROOF initiative has helped to improve budget allocations as well as the municipality’s accountability. In the area of budget execution, Tamil Nadu and Andhra Pradesh monitor ULB budgets with good results.

“ULBs and the public at large will gain from better PFMA practices as this would lead to better value for public money for citizens,  improved service delivery, and greater transparency and accountability in the spending of public money,” said Mr. Rachid Benmessaoud, Operations Advisor, the World Bank – India. “It would also improve the financial positions of urban local bodies and increase their creditworthiness, making it easier for them to leverage funds from the capital market for financing infrastructure needs.  In India we have seen that ULBs with effective PFMA have reported increased revenue collections, reduced expenditure and improved public image. Here in lie lessons for others.”

“Accrual based accounting system and Public Disclosure Law have been chosen as reforms to be adopted by the states and ULBs under the flagship programme of the Ministry of Urban Development -JNNURM,” said Mr. M. Ramchandran, Secretary Ministry of Urban Development, Government of India. “Findings of this study will be useful since the mission will soon be reaching halfway when the areas needing improvement can be effectively handled.”