"The states in India seem reluctant to empower urban local bodies both functionally as well as financially." Comment.
Approach · directive: “comment”
What it asks · Comment on whether States have really devolved functions and funds to municipalities, why they hesitate, and what the counter-arguments and remedies are.
It asks 3 things — answer each
- Comment: evidence that States hold back functional devolution to urban local bodies
- Comment: evidence that States hold back financial devolution
- Comment: why States hesitate, and what should change
Open with · The 74th Amendment (1992) made municipalities 'institutions of self-government', but Article 243W only says States 'may, by law, endow' them with powers, and that 'may' is where devolution stalls.
Cover
- Functional gap: CAG audits of 18 States found 17 of the 18 Twelfth Schedule functions devolved by law, but only 4 with complete autonomy.
- Parastatals and commissioners: development authorities and boards run water and planning; State-appointed commissioners outrank short-tenure mayors.
- Financial gap: own revenue is only 32% of ULB revenue (CAG); RBI (2022) finds heavy reliance on property tax and transfers.
- Weak State Finance Commissions (Article 243Y): delayed reports, recommendations ignored.
- Why States hesitate: loss of patronage and control, doubts about municipal capacity, their own fiscal stress; capacity gaps are real.
- Way forward: 15th FC grant conditions (SFCs, audited accounts, property-tax floor rates), funds–functions–functionaries together, municipal bonds.
Close with · Cities can deliver SDG 11 only if States treat them as a third tier of government, not as their agencies.
Add value (verified)
- Article 243W leaves devolution to State law: the Legislature 'may, by law, endow' municipalities with powers and authority to function as institutions of self-government.The Constitution of India (as on 1 May 2024), Article 243W - Legislative Department ↗“the Legislature of a State may, by law, endow— (a) the Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government”
- RBI's first Report on Municipal Finances (November 2022): municipal budgets are much smaller than in peer countries, and revenues rest on property tax and transfers from higher tiers, leaving little financial autonomy.Report on Municipal Finances - RBI press release, 10 November 2022 ↗“While the size of the municipal budgets in India are much smaller than peers in other countries, revenues are dominated by property tax collections and devolution of taxes and grants from upper tiers of government, resulting in lack of financial autonomy”
- CAG compendium of audits in 18 States (2024): 17 of the 18 Twelfth Schedule functions are devolved by law on average, but only 4 with complete autonomy.Compendium of Performance Audits on the Implementation of the 74th Constitutional Amendment Act, 1992 — CAG of India ↗“17 out of the 18 functions Compendium synthesising Performance Audits on the implementation of the 74th Constitutional Amendment Act (CAA) in 393 Urban Local Self-Governments (ULSGs) in 18 States. 1 Suburbs of Mumbai, Maharashtra However, only 4 functions are effectively devolved with complete autonomy.”
- The same CAG compendium: on average only 32% of urban local governments' total revenue is their own revenue.Compendium of Performance Audits on the Implementation of the 74th Constitutional Amendment Act, 1992 — CAG of India ↗“On average, only total revenue is own revenue. 32 per cent of ULSGs”
- 15th Finance Commission (2021–26): ₹4,36,361 crore for local bodies, with entry conditions including action on SFC reports, accounts online, and minimum floor rates of property tax for urban local bodies.Explanatory Memorandum / Action Taken Report on the 15th Finance Commission's Report (Annex III) — Finance Commission of India ↗“setting up of State Finance Commissions in States, act upon their recommendations and lay the explanatory memorandum as to the action taken thereon before the State legislature on or before March 2024 (ii) having both provisional and audited accounts online in the public domain (iii) fixation of minimum floor for property tax rates by the relevant State”
Question: UPSC's CS (Main) 2023, GS Paper II — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·
Model answer· 224words · Minimalist IAS
The 74th Amendment (1992) made municipalities 'institutions of self-government', but Article 243W says only that States 'may, by law, endow' them with powers. That 'may' explains why the promise has stalled.
How States withhold functions
- Paper devolution: CAG audits of 18 States found 17 of the 18 Twelfth Schedule functions devolved by law, but only 4 with complete autonomy.
- Parastatal capture: development authorities and water boards bypass elected councils.
- Weak mayors: State-appointed commissioners hold real executive power.
How States withhold finances
- Low own revenue: only 32% of ULB revenue is their own (CAG); property tax stays under-assessed.
- Grant dependence: RBI's 2022 Report on Municipal Finances finds little financial autonomy.
- Ignored SFCs: State Finance Commissions (Article 243Y) report late and are often shelved.
| Aspect | Constitutional design | Ground reality (CAG) |
|---|---|---|
| Functions | 18 in Twelfth Schedule | 4 truly autonomous |
| Finance | SFCs, own taxes | 32% own revenue |
States cite weak municipal capacity, a real concern; but capacity grows only with responsibility.
Way forward
- Conditional grants: the 15th Finance Commission tied its ₹4,36,361 crore local-body grants (2021–26) to SFC action, audited accounts and notified property-tax floor rates.
- 3Fs together: transfer funds, functions and functionaries as one package.
- Market finance: RBI urges municipal bonds.
Cities can deliver SDG 11, inclusive, safe, resilient and sustainable cities, only if States treat them as a third tier of government, not as their agencies.
Prepared by Minimalist IAS to the answer standard of Shivam Singh (mentor, 7 years) · facts checked against official sources (how we verify) · updated 3 Oct 2026. UPSC publishes no model answers: compare your structure and coverage with this, then write your own.
