CityFinance Stories

Category: Featured

  • Unpacking Urban Revenue Composition 

    Unpacking Urban Revenue Composition 

    In our previous blog on total revenue of Indian cities, we explored how total revenues vary dramatically across Indian cities, with resources concentrated in major metropolitan areas. But these total revenue figures reveal only a part of the story.  

    Understanding where that revenue comes from is equally important. The composition of a city’s revenue, how much it raises on its own versus how much it receives from higher tiers of government, speaks directly to its fiscal autonomy, financial resilience, and capacity for self-determined growth. Examining revenue composition thus moves the conversation beyond how much cities earn to how they earn it.

    As shown in the figure above, at the national level, the composition of municipal revenues exhibits a substantial share of grant revenue across ULGs. However, when we look at the graph below, we can see that this share is comparatively lower for million-plus cities. CityFinance data shows that larger ULGs, particularly million-plus cities, demonstrate a stronger own-source revenue base, supported by both tax and non-tax revenues, relative to smaller cities. 

    Although million-plus cities receive significant volumes of grants, these constitute a smaller proportion of their total revenue when compared to smaller ULGs. This reflects the larger revenue base of metropolitan cities, where tax and non-tax revenues contribute a greater share to overall municipal finances. 

    Notably, 4M+ cities show a relatively higher share of non-tax revenue within their revenue. This indicates a more diversified revenue composition with contributions from user charges, fees, rentals, and other service-related income streams alongside tax revenue. In contrast, smaller ULGs exhibit a relatively higher dependence on revenue grants within their overall revenue structure. 

    Overall, the data highlights variation in revenue composition across city size categories, reflecting differences in revenue structure and scale across urban India. 

    When compared with the national profile, state-wise regional variation becomes much more evident for FY 2021-22. 

    Northern states such as Uttar Pradesh (80% grants), Uttarakhand (84%), and Bihar (67%) show grant shares well above the national aggregate composition, with relatively lower tax and non-tax contributions. In contrast, southern states display a different composition: Telangana records 48% tax revenue and Andhra Pradesh 42% tax revenue, while Tamil Nadu shows a more balanced mix with 29% tax revenue and 34% grants. Gujrat and Maharashtra also exhibit less dependence on grants when compared to national aggregate composition.  

    Overall, the comparison reflects regional differences in revenue structure relative to the national composition, highlighting variation across India’s urban fiscal landscape.

    The Way Forward

    The analysis underscores that revenue profile of cities in India cannot be understood through aggregate revenue figures alone. A deeper look at revenue composition reveals important distinctions. While the proportion of intergovernmental grants in revenue composition of smaller cities remains higher, larger cities continue to receive higher per capita grants. The findings suggest that million-plus cities show higher collection of own-source revenue. Assigned revenue on the other hand decreased consistently which is a trend that warrants closer examination. The variations across states further reinforce that fiscal outcomes are influenced by governance structures, devolution frameworks and accounting practices.  

    Moving beyond aggregate figures to examine how city revenues are composed will offer a far more comprehensive understanding of where Indian cities stand fiscally and what it will take to strengthen their financial foundations. 

    In our next blog, we turn to Own Source Revenue performance across city categories and states and what it reveals about the fiscal health of India’s urban local governments. Stay tuned. 

    Note: All data is sourced from the Annual Financial Statements submitted by the ULGs on the CityFinance platform. To ensure comprehensive representation and account for variations in data coverage and quality across cities, the figures presented are based on extrapolated financial data covering all 4,824 cities. Among these, 2,541 cities (approximately 60%) possess 3 years of contiguous data (2019–20 to 2021–22) in Cityfinance platform. Data from these cities have been systematically extrapolated using the ’per capita scaling methodology’ to reflect the financial performance of the complete set of 4,824 cities. Learn more about the extrapolation methodology here.

  • Exploring City Expenditures with CityFinance.in: A Beginner’s Guide 

    Exploring City Expenditures with CityFinance.in: A Beginner’s Guide 

    This Total Expenditure Primer marks the second edition in a multi-part series on the city financial data hosted on CityFinance.in. Each edition in the series will spotlight one key fiscal indicator, offering a focused analysis to demonstrate the different kinds of insights that can be drawn from the data and how they inform a deeper understanding of urban finance. This initiative aims to foster greater understanding and engagement with the financial data of Indian cities, with the broader goal of enabling deeper analysis and further research in this critical area. Here we will be dealing with a crucial parameter that determines a city’s financial stability: Total Expenditure.

    What is a City’s Total Expenditure?  

    Urban infrastructure and services, from street lighting and water supply to road maintenance, are tangible results of a city’s expenditure at work. Understanding how much cities spend, how these funds are allocated, and why significant variations exist across urban centres is essential to evaluating the state of India’s urban governance. 

    At its simplest, Total Expenditure represents the complete amount of money spent by an Urban Local Government (ULG) during a financial year. It comprises two main components:  

    • Revenue Expenditure covers the day-to-day operational costs necessary to keep urban services running smoothly.  
    • Capital Expenditure refers to investments in creating or upgrading long-term infrastructure and assets.  

    ULG Expenditure Trends: A Decline in Spending (2020-2022) 

    Data shows that total expenditure of ULGs declined from 2020-21 to 2021-22. This drop in expenditure requires detailed investigation to determine whether it stems from reduced developmental or capital spending, lower recovery-related expenditure post-pandemic, contraction in government programmes, or a combination of these factors.  

    To understand this expenditure trend, let us examine how this change is  reflected in different population categories.  

    The Expenditure Divide: Unequal Fiscal Capacity across Cities

    Looking at the chart, it is clear that expenditure patterns vary significantly across different city categories. While it is expected that larger cities would spend more, the disparity is stark. Large cities with populations above 4 million account for the lion’s share of urban spending while smaller cities demonstrate modest expenditure levels.  

    It is important to note that these cities differ significantly in population size, revenue composition, urban service priorities, and other characteristics. Therefore, analysing expenditure patterns requires a differentiated approach that accounts for the distinct contexts of different city categories. 

    Examining per-capita spending reveals an interesting picture with megacities spending several times more per urban resident than mid-sized and smaller ULGs. This divergent fiscal behaviour suggests structural inequalities in urban finance. We must ask whether these differences stem from variations in resource availability, administrative capacity, or the differentiated cost of delivery of services in a metropolis versus a small town.  

    Across India: The Geography of Urban Spending 

    Expenditure capacity also varies by geography. As seen above, when we look at a state-by-state comparison, Southern and Western states demonstrate strong fiscal performance. Northern states show mixed performance, with some states maintaining surpluses while others exhibit low levels of expenditure. North-eastern states reveal an interesting picture with varied fiscal capacities across the region. 

    From Spending to Service Delivery: The Way Forward 

    While India’s megacities lead in urban spending, we cannot yet determine whether higher spending translates into better urban outcomes, as we lack the data linkages to connect expenditure with service delivery outcomes.  

    What matters is allocation. The allocation patterns between revenue and capital expenditure require further study to understand if cities that channel more funds towards water supply, sanitation, mobility, and public spaces, achieve better service quality compared to cities whose spending is dominated by administrative costs. It is important to note that establishment expenses could also reflect investments in hiring personnel to improve urban service delivery, which may contribute positively to service outcomes. However, strengthening local capacity for planning, budgeting, and monitoring is essential to ensure that every additional rupee spent enhances liveability and equity for urban residents.  

    As India prepares for 600 million urban residents by 2036, understanding these expenditure gaps is critical. As we saw in our previous blog on a city’s total revenue, it is clear that a city’s income streams directly dictate its capacity to spend. Hence, it is important to look at the different revenue streams of a ULG.  

    Stay tuned for a deep dive into a city’s own revenue. To explore more and see your city’s expenditure in detail, head over to cityfinance.in.

    Note: All data is sourced from the Annual Financial Statements submitted by the ULGs on the CityFinance platform. To ensure comprehensive representation and account for variations in data coverage and quality across cities, the figures presented are based on extrapolated financial data covering all 4,824 cities. Among these, 2,541 cities (approximately 60%) possess 3 years of contiguous data (2019–20 to 2021–22) in Cityfinance platform. Data from these cities have been systematically extrapolated using the ’per capita scaling methodology’ to reflect the financial performance of the complete set of 4,824 cities. Learn more about the extrapolation methodology here.

    This post comes from the team behind the City Finance platform. We spend our days digging into city financial data to bring you insights like this one.
  • Exploring City Revenues: A Beginner’s Guide with CityFinance.in

    Exploring City Revenues: A Beginner’s Guide with CityFinance.in

    This Total Revenue Primer marks the first edition in a multi-part series on the financial data of cities hosted on CityFinance.in. Each edition in the series will spotlight one key fiscal indicator, offering a focused analysis to demonstrate the different kinds of insights that can be drawn from the data and how they inform a deeper understanding of urban finance. This initiative aims to foster greater understanding and engagement with financial data of Indian cities, enabling deeper analysis and research in this critical area. 

    Total revenue refers to the aggregate income a city receives from all sources. Major sources of a city’s revenue include tax revenue, non-tax revenue, assigned revenues, and intergovernmental grants from both state and central governments.

    Together, these streams form the financial backbone that supports a city’s operations and development initiatives. 

    Rising Revenues, Widening Revenue Gaps 

    Revenues of Urban Local Governments (ULGs) are rising across India, reflecting positive economic growth. However, this increase is far from uniform, with significant disparities emerging between cities.  

    As we see in the chart above, the 7 cities that serve 17% of the urban population of India report the largest share of receipts at 42%. In comparison, 3,374 cities that serve 41% of India’s urban residents form just 16% of total revenue. Could bigger cities simply have higher revenue because of their larger population base, or does the trend hold even when we look at per capita revenue? Let us examine. 

    Larger cities generate significantly more revenue per person, with cities in the 4 million plus population category collecting ₹15,542 per capita – nearly twice the next population category. This indicates that the revenue advantage of larger cities is not simply due to their larger population base but reflects genuinely higher per capita economic activity and tax collection capacity. 

    Growth rates (2020-21 to 2021-22) tell an even more interesting story: larger cities are not only generating more revenue, but they’re also growing faster than smaller cities. This widening gap indicates that smaller municipalities will require substantially greater support from central and state governments, through increased transfers, capacity-building initiatives, or targeted urbanization programs – to keep pace with the demands of rapid urban growth. Without such interventions, the revenue disparity between large and small ULGs is likely to deepen over time.  

    Big Cities Under the Lens: Who’s Leading the Way? 

    Now we know that India’s largest cities are at the forefront of the country’s growth trajectory, with their total revenues far exceeding those of smaller urban local governments. But as the graph below illustrates, there is considerable variation in total revenue even within these major cities.  

    While population size plays a critical role – Mumbai, as India’s most populous city, naturally generates substantial revenue, the disparity remains significant even when examined on a per capita basis. This suggests that factors beyond population, such as economic activity, tax collection efficiency, and administrative capacity, drive revenue differences among India’s largest cities. 

    Among the remaining large cities, Chennai reports the lowest total revenue at ₹3,255 crores. However, looking at per capita revenue, Hyderabad registers the weakest performance, with Bengaluru not far ahead. 

    These contrasts underscore the uneven fiscal capacity among major urban centres, shaped by differences in economic activity, administrative efficiency, local revenue mobilization patterns, and crucially, the extent of devolution of functions from state governments to ULGs.

    Ultimately, these figures highlight the importance of examining city finances through multiple lenses; both absolute and comparative metrics are essential to understanding the true fiscal health of India’s urban landscape. 

    Beyond the City: Mapping Revenue across States 

    Indian states vary significantly from each other in terms of level of urbanization, political environment, and institutional capacity. These factors significantly influence how cities generate and mobilize revenue. 

    The state-wise per capita revenue data reveals distinctive regional patterns across India. The most striking is the massive variation that exists across the country, ranging from Assam’s ₹1,525 to Maharashtra’s ₹18,115 – a more than tenfold difference in per capita revenue. Here, Maharashtra stands out dramatically as the highest per capita revenue generator, reflecting Mumbai’s economic dominance.

    Southern states demonstrate consistently strong performance, with Kerala (₹7,481), Karnataka (₹4,745), Tamil Nadu (₹4,191), and Telangana (₹3,741) all showing relatively high per capita revenues.

    Western states also excel, with Gujarat generating ₹5,839 per capita and Madhya Pradesh reaching ₹5,017. In contrast, northeastern states lag significantly behind, with Assam at ₹1,525 and Mizoram at ₹1,467 representing the lowest figures.  

    These disparities underscore that revenue generation capacity depends not just on urbanization levels, but critically on the extent of functional devolution and administrative powers granted to ULGs – more urbanized states don’t necessarily generate more revenue if their local governments lack adequate authority and resources.  

    Conclusion 

    This analysis reveals a stark reality: India’s urban revenue landscape is marked by significant concentration and growing disparities. Larger cities not only command the lion’s share of total revenue but also generate substantially higher per capita income and experience faster growth rates. Addressing this challenge requires recognizing that state-level decisions about revenue-sharing, functional devolution, and administrative autonomy critically shape urban fiscal capacity. We need to investigate these patterns further to understand how they extend beyond population size to economic activity, and administrative capacity.

    These widening gaps raise critical concerns about fiscal federalism and the sustainability of India’s urbanization trajectory. As revenue inequality between large and small cities increase, the challenge ahead involves both learning from high-performing cities and reforming state-level frameworks that govern urban finance. 

    Mumbai has emerged as a clear outlier throughout this analysis. Stay tuned for an analysis, where we dive deeper into what makes India’s financial capital such a revenue powerhouse. 

    Note: To ensure comprehensive representation and account for variations in data coverage and quality across cities, the figures presented are based on extrapolated financial data covering all 4,824 cities. Among these, 2,541 cities (approximately 60%) possess 3 years of contiguous data (2019–20 to 2021–22) in Cityfinance platform. Data from these cities have been systematically extrapolated using the ’per capita scaling methodology’ to reflect the financial performance of the complete set of 4,824 cities. Learn more about the extrapolation methodology here.  

    This post comes from the team behind the City Finance platform. We spend our days digging into city financial data to bring you insights like this one.