Deccan IAS Academy

17/08/2019

AP GRAMASACHIVALAYAM--CURRENT AFFAIRS

12/06/2017

Union Public Service Commission (UPSC) has said it will debar from future exams the candidates who bring gadgets like mobile phones or bluetooth devices inside the centre.

Other Important Points

In a set of do’s and don’ts for the civil services aspirants, the UPSC has also asked candidates not to bring any costly items inside the examination halls.
Candidates are also advised to bring black ball point pen to the examination hall as they are required to fill the OMR answer sheets and attendance lists with such pens only.

22/03/2017

http://www.livemint.com/Politics/xgPUublqyZa9YKXT13YZmJ/Shortage-of-over-1400-IAS-900-IPS-officers-in-India-Govt.html

There are 4,926 IAS officers as against their total authorised strength of 6,396, union minister Jitendra Singh tells Lok Sabha in a written reply

08/03/2017

Economic Growth

Economic Growth is change in the value of the goods and services produced in the economy or an increase in the capacity of an economy to produce goods and services, compared from one period of time to another.

How do we measure the growth? There are several indicators and methods to calculate the same.

The most accepted measure of all is that of GDP- Gross Domestic Product.

Gross Domestic Product

The Gross Domestic Product measures the value of economic activity within a country. Strictly defined, GDP is the sum total of the market values, or prices, of all final goods and services produced in an economy during a period of time.

There are, however, three important distinctions within this seemingly simple definition:

GDP is a number that is calculated in local currency.
GDP tries to capture all final goods and services as long as they are produced within the boundaries of the country, thereby assuring that the final monetary value of everything that is created in a country is represented in the GDP.
GDP is calculated for a specific period of time, quarterly, half yearly or annually.
Calculating GDP

Now that we have an idea of what GDP is, let’s go over how to compute it. We know that in an economy, GDP is the monetary value of all final goods and services produced.

For example, let’s say India only produces Apples and Bananas.

In year 1 we produce 5 bananas that are worth Rs. 2 each and 6apples that are worth Rs. 15 each.

The GDP for the country in this year equals (quantity of bananas X price of bananas) + (quantity of apples X price of apples) or (5 X 2) + (6 X 15) = 100.

As more goods and services are produced, the equation increases. In general, GDP = (quantity of A X price of A) + (quantity of B X price of B) + (quantity of whatever X price of whatever) for every good and service produced within the country.

The calculation of production of final goods and services at the current prices is called Nominal GDP
Nominal GDP can change from time to time because of two reasons:
changes in the physical volume of output or
changes in the prices at which output is valued
We want to use GDP to look at changes in the physical volume of output. Since Nominal GDP can also change due to changes in the prices at which output is valued it is necessary to “deflate” the value recorded for Nominal GDP (GDP with inflation) into “real” so we can make comparisons across years.
Real GDP can change only because of changes in the physical volume of output. As a result Real GDP is considered a better measure of economic growth than nominal GDP.
The calculation of Production of final goods and services valued at the base year prices which are referred to as constant prices is called Real GDP.
GDP Deflator = Nominal GDP / Real GDP
(Final goods and services is important here, counting intermediate goods would lead to the double counting and increases the value of the output)

Here in the given example we have only two products and two actors, the Apples and Bananas and producer and consumer; but in a complex economy there are Government levying taxes, producers wanting to export, and sellers looking for profit and several other factors.

Consider this figure.

The calculation of GDP at the actually transacted prices is called GDP at Market Prices. (This would include the indirect taxes levied, subsidies provided)
The calculation of GDP at the actual cost of production of goods and services and not the sale is GDP at Factor Cost (This wouldn’t include indirect taxes but will include subsidies provided for the production)There are three different ways of calculating GDP.
Expenditure Approach
Income approach
Output Approach
The small example given above is the Output Approach – which adds the market value of final goods and services. The method of calculation should ideally give the same results as the other two approaches too. But owing to the levels of inventorywhere goods would have been produced but not sold, there will be differences. There will also differences due to the sale and purchase of the second-hand goods and newly produced goods have to be counted for the GDP.

The macroeconomists use indirect ways, a standard set of categories to breakdown an economy into its major constituent parts in order to calculate GDP.

Expenditure Approach



GDP is calculated by the sum of consumer spending, investment, government purchases, and net exports, as represented by the equation:
Y = C + I + G + NX;
In this equation Y captures every segment of the national economy;Y represents both GDP and the national income. This because when money changes hands, it is expenditure for one party and income for the other, and Y, capturing all these values, thus represents the net of the entire economy.
Consumer spending (C)is the sum of expenditures by households on durable goods, nondurable goods, and services.
Investment (I) is the sum of expenditures on capital equipment, inventories, and structures.
Government spending (G) is the sum of expenditures by all government bodies on goods and services.
Net Export (NX) is the difference between exports and imports.
Income Approach

This approach calculates National Income, NI. NI is the sum of the following components:

Labour Income (W)
Rental Income (R)
Interest Income (i)
Profits (PR)
NI = W + R + i + PR

Labour Income (W): Salaries, wages, and fringe benefits such as health or retirement.

Rental Income (R): This is income received from property received by households. Royalties from patents, copyrights and assets as well as imputed rent are included.

Interest Income (i):Income received by households through the lending of their money to corporations and business firms. Government and household interest payments are not included in the national income.

Profits (PR): The amount firms have left after paying their rent, interest on debt, and employee compensation.

But this is calculating National Income, instead of GDP.

With the income approach, the GDP of a country is calculated as its national income plus its indirect business taxes and depreciation, as well as its net foreign factor income. To express the income approach formula to GDP as follows:

GDP= Total National Income + Indirect Taxes + Depreciation + Net Foreign Factor Income

(Sometimes inclusion of Indirect Taxes is controversial

GDP vs. GNP

GDP calculation involves accounting profit and not economic profit.
GDP is just one way of measuring the total output of an economy.
Gross National Product, or GNP, is another method. GDP, as said earlier, is the sum value of all goods and services produced within a country.
GNP is the sum value of all goods and services produced by permanent residents of a country regardless of their location.
The important distinction between GDP and GNP rests on differences in counting production by foreigners in a country and by nationals outside of a country.
Concept of Depreciation:

The machinery or the capital goods undergo wear and tear this is called depreciation. GDP means that depreciation is not subtracted. If the depreciation is subtracted from GDP it become Net Domestic Product.

NDP = GDP – Depreciation.

Similarly

NNP = GDP – Depreciation, and NNP is called the “National Income”

Slowdown, Recession and Recession

A general decline in the economic activity across the economy but still clocking a positive GDP albeit lower than previous quarters is called slowdown.
A recession is a large decline in activity across the economy like in industrial production, employment, real income and wholesale-retail trade.
The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP).
A depression is a deep and long-lasting recession. While no specific criteria exist to declare a depression, unique features of the last U.S. depression, the Great Depression of the 1930s, included a GDP decline in excess of 10% and an unemployment rate that briefly touched 25%.
Per Capita Income

Per capita GDP is a measure of GDPdivided by the Population.
The per capita GDP is especially useful when comparing one country to another, because it shows the relative performance of the countries.
A rise in per capita GDP signals growth in the economy and tends to reflect an increase in productivity
Purchasing power Parity (PPP)

However, when comparing with performance of other countries, we should also be adjusting it with the purchasing power to avoid the disparities of direct conversion
The following micro-example can illustrate that point. Suppose it costs $10 to buy a shirt in the U.S. It costs Rs 350 to buy the same shirt in India. To make the correct comparison the Rs. 350 in India needs to be converted into U.S. dollars. If the exchange rate (70) was such that the shirt in India costs Rs 700, the PPP would be 350/700, or 1.5. For every $1.00 spent on the shirt in the U.S., it takes $0.50 to obtain the same shirt in India.
The actual purchasing power of any currency is the quantity of that currency needed to buy a specified unit of a good or a basket of common goods and services. PPP is determined in each country based on its relative cost of living and inflation rates.
Then, GDP are adjusted for relative purchasing power parity or PPP. This adjustment is based on an attempt to convert nominal GDP into a number more easily comparable between countries with different currencies
How is GDP calculated in India?

The Data Collection Process

The Central Statistics Office (CSO), under the Ministry of Statistics and Program Implementation(MoSPI), is responsible for macroeconomic data gathering and statistical record keeping.
Its processes involve conducting an annual survey of industries(ASI) and compilation of various indexes like the Index of Industrial Production(IIP), Consumer Price Index (CPI), etc.
The CSO coordinates with various federal and state government agencies and departments to collect and compile the data required to calculate the GDP and other statistics.
For example, data points specific to manufacturing, crop yields, or commodities, which are used for the Wholesale Price Index (WPI) and CPI calculations, are gathered and calibrated by the Price Monitoring Cell in the Department of Consumer Affairs under the Ministry of Consumer Affairs.
Similarly, production-related data used for calculating IIP is sourced from the Industrial Statistics Unit of the Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry.
All the required data points are collected and aggregated at the CSO and used to arrive at GDP numbers
GDP Calculation Process

The GDP in India is calculated using two different methods, leading to differing figures that are nonetheless close in range.
The first method is based on economic activity (at factor cost), and the second is based on expenditure (at market prices). Further calculations are made to arrive at nominal GDP (using current market price) and real GDP (inflation-adjusted).
Among the four released numbers, the GDP at factor cost is the most commonly followed figure and reported in the media.
The factor cost figure is calculated by collecting data for the net change in value for each sector during a particular time period. The following eight industry sectors are considered in this cost:
Agriculture, forestry and fishing
Mining and quarrying;
Manufacturing;
Electricity, gas and water supply;
Construction;
Trade, hotels, transport and communication;
Financing, insurance, real estate and business services;
Community, social and personal services.
The GDP numbers from the two methods may not match precisely, but they are close. The expenditure approach offers a good insight into which parts contribute most to the Indian economy.
For example, domestic household consumption, which forms 59.5% of the economy, is the reason why India remains unaffected to a good extent by global slowdowns.
Any economy with a high concentration on exports will be more susceptible to the effects of global recessions.
Timelines

Each quarter’s data are released with a lag of two months from the last working day of the quarter.
Annual GDP data are released on May 31, with a lag of two months. (The financial year in India follows an April to March schedule.)
The first figures released are quarterly estimates. As more and more accurate datasets become available, the calculated figures are revised to final numbers.
Recently there is a controversy going in the media that numbers are fudged, this is nonsense or you can say politically motivated, there may be inadvertent errors in the methodology due to large informal sector in India but the forging of numbers is not an option because there will be another set of revised data released later on which can’t deviate largely from the advanced estimates.
Challenges and Drawbacks in GDP metric

While GDP is a convenient way to get an idea about the state of an economy, it is by no means a perfect approach. One criticism that has been levelled is that there is no accounting for activities that are not part of the legalized economy.
Thus, parallel economy, informal economy, drug dealing and such illegal activities that generate a lot of income create hurdles in calculating the GDP.
Another criticism is that some activities that provide value are not factored into GDP. For instance, if you hire a maid to keep your house clean, a cook to prepare your meals and a nanny to care for your children, you will pay these hired helpers and such payments factor into GDP.
On the other hand, if you do your own cooking and cleaning and care for your children without hiring a nanny, these activities do not contribute to GDP. And although GDP provides an idea about an economy’s performance, it doesn’t necessarily reflect the welfare of its citizens since it doesn’t account for softer aspects such as their levels of happiness. (CARE ECONOMY)
Presence of Barter trade in some parts of the rural areas, it keeps the GDP estimates at lower level than the actual.
GDP doesn’t account for the economic cost of the production of goods and services, like the river pollution in Ganga done by the industries by the side. Climate change due to increasing CO2.
GDP doesn’t reveal inequalities of rich and the poor, and disparities in the Gender.
It doesn’t measure the sustainability of the growth.

05/03/2017

Had a glance look on budget allocations and let me give my analysis on that regarding revenues and expenditures.

Government gets revenue(money) in the form of Revenue receipts and Capital receipts. Revenue receipts again classified in to Tax revenue receipts and non-Tax revenue receipts. Tax revenue receipts include money collected through taxes that include income tax, Corporate tax,Excise duty,Custom duty, counter veiling duty etc., which are recurring in nature. Non-Tax revenue includes money accrued through profits/dividends earned by PSUs(Public Sector Undertakings), departmental undertakings(such as Railways), Public Corporations (such as SBI,LIC,ONGC,HAL,Coal India Limited,SAIL etc.,) and government companies.

Capital receipts is classified in to debt Capital receipts (need to be returned as the name itself is self explanatory) and non-debt Capital receipts( need not be returned). Debt capital receipts include accruing of money through by borrowings from organisations such as EPFO,SBI ,from public as well by issuing g-secs(govt securities) . Non debt capital receipts include money accrued through disinvestment from PSUs etc.,

Expenditure is classified in to Revenue expenditure and Capital expenditure. Revenue expenditure includes money spent on subsidies, public administration, Ministers' travelling expenses, salaries to government employees etc.,

Capital expenditure include money spent on creation of capital assets such as roads, ports, railways, defence vehicles, school buildings and other infrastructure projects.,

Now if we see 2016-17 budget allocations superficially, Indian government trying to improve its tax revenue receipts by imposing tax on PF withdrawl, increasing Service tax, Excise duty of few products, introducing new Cess and Surcharges like petrol cess, coal cess etc., If you closely observe this, we can see that those are heavy burden on common man. To improve revenue receipts,why don't govt increase corporate tax? It is because of corporate lobby and bogus trickle down theory they would say.

Also, for the last financial year, govt had given tax incentives to corporates of nearly 1 lakh crores with the presumption that they would establish new industries. I am quite against to this method. Instead of giving lakhs of crores of rupees as incentives to Corporates, it should improve the purchasing power of people through welfare schemes so that industries would bound to come .

[ To better understand this, I illustrate this with an example. Suppose, to establish a cafeteria (food court) , if you give incentive to the owner that you will give building charge free, electricity free etc., it wont perform good. If you increase the purchasing power of the people residing nearby that cafeteria, Owners bound to establish cafeterias even without craving for incentives . In this way income can be generated for both the owner and for the govt in the form of income tax]

Giving incentives to industrialist for the establishment of new industries is outdated method. Instead, govt should improve the purchasing power of people so that industries would bound to come.{Had I been Finance Minister / Finance Secretary, I would have insisted for it}

To my knowledge, strategies to be followed to improve purchasing power of people are :
a) Introduce welfare schemes and allocate more and more funds for programmes such as MNREGA (but for productive work)
b) Keep inflation under check always
c) Increase direct taxes but not indirect taxes.

Anyway, the budget allocations that impressed me are emphasis on rural development, infrastructure projects like laying new roads, revamping ports etc., and most importantly Finance Ministry's commitment for the fiscal consolidation( reduction of fiscal deficit to 3.9% of GDP).

India being a welfare state, need inclusive growth along with sustainable development, not mere economic development.

03/03/2017

Anti-Microbial Resistance – The Superbug Problem

Introduction

Antibiotics which once cured diseases are now becoming the potential killers by prolonged illness and disability. The world is transitioning into a post-antibiotic era where even the common infections and minor injuries are beginning to kill due to increasing “Anti-Microbial Resistance” (AMR)

What is Anti-Microbial Resistance?

* Antimicrobial resistance (AMR) is resistance of a microorganism to an antimicrobial medicine to which it was previously sensitive.
* Resistant organisms (they include bacteria, viruses and some parasites) are able to withstand attack by antimicrobial medicines, such as antibiotics, antivirals, and anti-malarials, so that standard treatments become ineffective and infections persist and mayspread to others. These resistant pathogens are commonly called superbugs.
* AMR is a consequence of the use, particularly the misuse, of antimicrobial medicines and develops when a microorganism mutates or acquires a resistance gene.

Why is it an Alarming Situation?

* AMR kills, hampers the control of infectious diseases, threatens a return to the pre-antibiotic era, increases the costs of health care, threatens health security, and damagestrade and economies and jeopardizes health-care gains to society.
* In 2015, AMR was identified as the cause for about 23,000 deaths annually in the US andabout 25,000 such deaths in Europe.
* Accurate data on AMR in India is unavailable but the highest number of deaths caused by resistant pathogens passed on to newly born babies from mothers or the environment—approximately 58,000.
*Antimicrobial resistance a ‘greater threat than cancer by 2050’ the director of health at the UN Development Programme.

Causes for the AMR

* In certain cases occurs through the natural evolution of resistance in bacterial pathogens.
* The rising consumption of antibiotics is a major contributor.
* New Delhi metallo-beta- lactamase (NDM) enzyme, which makes bacteria resistant tobeta-lactam antibiotics, is now present globally. This indicates free movement of ABR across boundaries, with serious consequences.

Factors responsible for increasing AMR

The weak public health system, cheap antibiotics available in the market, and their unregulated use, that has created ideal conditions for superbugs.
* Prescription of antibiotics for a variety of diarrhoeal and respiratory infections despite their limited curative potential has exacerbated the situation.
* Poor regulation of pharmacies and licensing out several pharmacies to a single pharmacist introduces a large number of unqualified personnel into the supply chain.
* New virtual marketplaces have made the entire drug distribution process an opportunity for unchecked financial gains by irresponsible actors.
* The lack of awareness among patients regarding the appropriate use of antibiotics has led to self-medication and non-adherence to the prescribed course of antibiotics, further intensifying the problem.

Measures taken so far

Chennai Declaration, 2012
* A Roadmap to Tackle the Challenge of Antimicrobial Resistance – A Joint meeting of Medical Societies in India” was organized as a pre-conference symposium of the 2nd annual conference of the Clinical Infectious Disease Society (CIDSCON 2012) at Chennai
* This was the first ever meeting of medical societies in India on issue of tackling resistance, with a plan to formulate a road map to tackle the global challenge of antimicrobial resistance from the Indian perspective.
* The outcome emerged as Chennai Declaration.
Some major recommendations made in the Declaration include
* formulation of an effective national policy to control the rising trend of antimicrobial resistance,
* a ban on the over-the-counter sale of antibiotics, and
* changes in the medical education curriculum to include training on antibiotic usage and infection control
* Setting up of a National Task Force to guide and supervise the regional and State infection control committees.
* An Infection Control Team (ICT) be made mandatory in all hospitals.
* Regulatory authorities and accreditation agencies such as the National Accreditation Board for Hospitals and ISO must insist on a functioning ICT during the licensing and accreditation process
* The Medical Council of India should introduce one-week antibiotic stewardship and infection control training in the third, fourth and final year of MBBS and two-week training at the PG level.
* National Accreditation Board for Hospitals & Healthcare Providers (NABH) insist on strict implementation of hospital antibiotic and infection control policy, during hospital accreditation and re-accreditation processes.

Actions Taken Under Chennai Declaration

* To meet the obligations of the declaration, the National Programme on Containment of Antimicrobial Resistance was launched under the 12th Five-year Plan.
* A core objective was the generation of quality data from 30 laboratories on antimicrobial resistance of pathogens posing a grave public health risk.
* Though meant to be completed within 2017, only 10 labs have so far been brought within the data-gathering exercise.

Global Action Plan on AMR

Alert to this crisis, the May 2015 World Health Assembly of WHO adopted a global action plan on antimicrobial resistance, which outlines five objectives:
* to improve awareness and understanding of antimicrobial resistance through effective communication, education and training;
* to strengthen the knowledge and evidence base through surveillance and research;
* to reduce the incidence of infection through effective sanitation, hygiene and infection prevention measures;
* to optimize the use of antimicrobial medicines in human and animal health;
* to develop the economic case for sustainable investment that takes account of the needs of all countries and
* to increase investment in new medicines, diagnostic tools, vaccines and other interventions

Way Forward

* Tackling the superbug problem requires massive data collection and analysis. Well-designed studies and indicator surveys providing general insight into the situation are critical to begin with.
* Studies can provide a clearer picture of the prescribed doses of antibiotics and their pattern of use (including the why, when, where, and for what relating to antibiotic consumption)
* Indicator surveys can attempt to identify the health outcomes emerging from the use of such antibiotics for different ailments.
* Frequently repeated surveys, with their range expanded to track geographic and demographic representative data are a policy imperative if India wants to build comprehensive indicators of ABR.
* The health departments of the Central and state governments work in coordination with nodal bodies in the technology space to develop an information-sharing grid.
* The grid should also have smart data-mining solutions built into it.
* Molecular biologists should be consulted for their insights on the genetic and molecular mechanisms responsible for such resistance.

Conclusion

The integration of data from various public and privately operated hospitals, pharmacies, and drug procurement services across the country, data analytics to track the correlation between antibiotic consumption and induced drug resistance, and robust information sharing with the public and health authorities is the right approach moving forward.
* Access to this online database can help physicians track ABR patterns; predict health outcomes; and prescribe drugs suitable for patient needs.
* It will not only help in improving clinical outcomes but also facilitate the deployment of computational and statistical models to accurately predict epidemics.
* This can aid local health bodies in issuing warnings and controlling the outbreak of infection.
India, sitting at the cusp of a digital revolution, is well placed to integrate such solutions with public health management and address the ABR problem.

Questions

1. Medicine is losing more and more mainstay as pathogens develop resistance, has the world done enough to deal with the crisis?
2. How could technology help in dealing with the new world epidemic of Anti-microbial crisis?
3. What are the measures taken by Indian Government to tackle AMR? Critically examine.

02/03/2017

Following is the Summary of ECONOMIC SURVEY 2016-17 – Chapter 14 – From Competitive Federalism to Competitive Sub-Federalism: Cities as Dynamos

Introduction

India, urbanisation is rapidly on the rise. As recently as 1991, there were only 220 million Indians living in cities, equivalent to about one-quarter of the population.

By 2011, there were no less than 380 million, living in around 8,000 cities/towns, at least 53 of which were home to over 1 million people.

Urban Indians now form about one-third of the population – and they produce more than three-fifths of the country’s GDP.

Cities that are entrusted with responsibilities, empowered with resources, and encumbered by accountability can become effective vehicles for unleashing dynamism so that to competitive federalism India can add, and rely on, competitive sub-federalism.

Background

Contrary to perception, India’s urbanisation rate appears to have been similar to that in other countries. Countries have followed a pattern of urbanisation where the level of urbanization has increased with the per capita GDP.

Contrary to perception, India and China have had very similar trends of urbanization.

In India many of the smaller cities are unusually small. And contrary to what one might think, so are the bigger ones. There are many reasons why the large cities are unusually small.

One explanation might be that their infrastructure is overburdened.
Another is that India is land-scarce relative to most countries, discouraging migration particularly because distorted land markets render rents unaffordable.
By 2050, its land-to-population ratio will have declined fourfold relative to 1960, and India will be among the most land-scarce countries in the world.
Further mobility in India is limited by strong place-based preferences embedded in deep social networks in India.
India’s urbanisation rate should begin to converge with those in similar emerging markets, rising to 40 per cent by 2030. And much of this urban growth is likely to take place in the bigger cities. This will create opportunities – and risks.

Key Challenges

Urban local bodies (ULBs) face major and inextricably linked problems: poor governance capacities, large infrastructure deficits and inadequate finances.
ULBs face a governance challenge.
Cities do not have a single city government or a local self-government, leading to functional overlap.
There is a significant fragmentation of responsibilities and service delivery across a gamut of institutions
The second challenge is the infrastructure deficit.
Addressing this infrastructure deficit will require resources, some of which could come from the Centre and the states.
The Fourteenth Finance Commission (FFC) has recommended a grant of around $ 87,000 crore to the municipalities for the period 2015-20, but raising sufficient resources has not proved easy.
The 74th Constitutional Amendment Act of 1992 leaves it to the discretion of state legislatures to devolve finances so that ULBs can fulfil these functions.
ULBs by and large have not been able to levy adequate user charges to cover even the operation and maintenance costs.
Issuing municipal bonds has been challenging owing to the poor state of ULB finances and governance.
As a result of these challenges, cities face grave difficulties in securing sufficient revenues.
Lessons from Across India

According to the data provided by Janaagraha Centre for Citizenship and Democracy, Bengaluru, and the 2011 Census, we can now examine the links between service delivery and fiscal strength, with the latter measured in four different ways.

Greater service delivery is correlated with more:

Staffing
Capital expenditure per capita
Resources
Own revenue
The correlation is especially strong with staffing and expenditures. A clear conclusion is that more resources seem to be associated with better outcomes.

In contrast, it is difficult to find a relationship between service delivery and governance.

On the other hand there is actually a negative relationship between having a directly elected Mayor and the availability of services.
There also does not seem to be a strong correlation between mayoral tenure and outcomes.
One possible reason could be that a directly elected Mayor can function effectively only if he/she has the support of majority members of the municipal council, which is not always the case.
Considering this fact, two state governments namely, Rajasthan and Tamil Nadu, have amended their respective municipal act to provide for indirect mayoral elections.
Mobilizing Resources

One striking correlation (or its absence) is between formal taxation powers and actual mobilisation of resources.
ULBs like Mumbai and Pune even with low scores on taxation powers do very well in own revenue while, at the same time, ULBs like Kanpur, Dehradun etc. even with relatively higher taxation powers perform badly in terms of own revenue.
At first, this may seem counter-intuitive, which, at closer inspection would reveal that it is not the case.
This is because having the powers to impose a greater number of taxes do not necessarily mean greater revenues for an ULB.
Many other factors are important for being able to collect greater revenues such as the size of the tax base, the efficiency in tax collection and the level of economic activity in the city area.
Perhaps the greatest immediate scope for revenue comes from the property tax. Property tax as a share of own revenue is above 50 per cent in Kanpur and Lucknow, but it is less than 15 per cent in Bhopal and Ranchi. So, the problem is not necessarily that ULBs cannot raise resources because they are prevented from doing so.
The major factors contributing to poor realisation from property tax are the poor assessment rate, weak collection efficiency, flawed methods for property valuation, loss on account of exemptions, and poor enforcement.
Conclusion

Urbanisation will pose considerable challenges for municipalities over the coming decades. But these challenges can be – indeed, must be – overcome, and the analysis in this chapter points to some priority areas.

The first task is empowering ULBs financially.

The analysis shows that municipalities that have generated more resources have been able to deliver more basic services. The
states should, therefore, empower cities to levy all feasible taxes.
Municipalities also need to make the most of their existing tax bases. There is a need to adopt the latest satellite based techniques to map urban properties. The Government should leverage the Indian Space Research Organization (ISRO)/ National Remote Sensing Agency (NRSA) to assist ULBs in implementing GIS mapping of all properties in the area of a ULB. Property tax potential is large and can be tapped to generate additional revenue at city level.
It is true but tiresome to repeat that ULBs need to be empowered but the political economy challenges—higher level bodies (state governments) needing to cede power and sharing resources–are daunting. The big question here is whether Finance Commissions should take cognizance of this political economy challenge identified by Professor Chelliah and allocate even more resources to ULBs or whether to respect the sovereignty of states and hope that they will themselves be forthcoming in decentralizing down – fiscally and goverancewise – commensurate with the needs of urbanisation.
Finally, data and transparency can play an important role here.

MoUD should give greater priority to compile and publish comprehensive data on ULBs and urban sector. Perhaps, grants to ULBs should be more tightly linked to comprehensive and updated data disclosure and transparency by ULBs.
NITI Aayog should compile comparative indices of municipalities’ performance annually based on the actual accountability and administrative capacity to deliver the core public services.