On 1 February, the XVI Finance Commission allocated a historic INR 3.56 lakh crore to India’s cities. It also raised the share of urban in local government grants to 45%, up from approximately 36% under the XV Finance Commission. Additionally, the Commission substantially increased the proportion of untied grants to Urban Local Governments (ULGs) to 52% (INR 1,84,094 crore).
This unprecedented quantum and share of urban grants is a welcome recognition of India’s urban reality and the crucial role cities play in the country’s economic and social development. Importantly, this increased quantum and flexibility will enable cities to leverage five-year funding certainty for long-term infrastructure and service delivery planning — better water supply, sanitation, waste management, urban mobility — that could translate into more livable cities with better quality of life for all citizens. Janaagraha’s analysis examines the XVI FC’s recommendations and their implications for urban governance and municipal finance.
Drawing on Janaagraha’s two decades of Finance Commission engagement — including our substantive submissions to the XVI FC, data from CityFinance.in used in the Commission’s analysis, and a first-of-its-kind national conference of mayors organised in collaboration with the XVI FC — this deck provides a detailed assessment of grant design, state-wise allocations, implementation pathways, and the opportunities and constraints ahead.
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