Metropolitan Public Finances

In an attempt to understand public finance in metropolitan regions, this paper by Abhay Pethe presents an analysis of the issues faced by one of the most important urban agglomerations in India: the Mumbai metropolitan region (MMR). Slack (2007, 15) terms the governance structure in Mumbai the “one-tier fragmented government model.” It is important to recognize linkages with and participation of the central and state governments in the region. This direct participation can be attributed to the fact that the region contributes 70 percent of state-level and more than 11 percent of national-level tax revenues.

The MMR may be characterized as the “goose that lays the golden egg,” a strong economic engine that creates a stake for the higher levels of governments to remain invested in the region so that growth is sustained. However, given the set of problems the region faces in terms of inadequate infrastructure and poor livability, the extent of investments in the region by higher-level governments is not in sync with the level of return that accrues to them. This paper highlights the structure of public finance and governance in MMR and considers problems and policy reform options.

This paper was presented at a 2011 conference at The Brookings Institution organized by the Lincoln Institute of Land Policy and is Chapter 10 of the book Financing Metropolitan Governments in Developing Countries.