Normative Approach to the Fiscal Assessment of Local Self Governments- a Case Study of ULBs in Kerala, India

Abstract

The 74th Constitutional Amendment provided functional domain to the Urban Local Bodies (ULB) in India and it recognized Urban Local Bodies as the best agencies to deliver basic ervices such as water, health, education, waste management, sanitation etc. The decentralized urban local governance regime in Kerala aims at providing devolution of functions, finances, functionaries and freedom of planning to Urban Local Bodies enabling them to cater better services to the people at large. However these efforts have not been transpired into effective service delivery in urban governance.  Myriads of factors such as poor finances, lack of clear activity mapping, multiplicity of agencies at field level, poor stakeholder participation etc., which adversely affect effective public service delivery. It is argued that if these issues are managed, governance can be emerged from a ‘top down model' for the people to a ‘bottom top model' by the people.

Under the normative approach, estimation of ‘under spending' is used as an indicator of the fiscal performance of the ULBs. The under spending, under the normative approach is influenced by two sets of factors: exogenous and endogenous factors. The exogenous factors include dependency and decentralization whereas the endogenous factors include cost recovery, revenue administration efficiency and establishment and administrative expenditure. The Ahluwalia committee estimated percapita expenditure norms for eight urban public services for twenty year period from 2012 to 2031 at 2011-12 prices. The present study used the same percapita expenditure norms estimated by the report on ‘Indian urban infrastructure and services' adjusted to inflation. The analysis on the extent of fiscal decentralization and fiscal performance of TMC under standard and normative approach reveals low level of fiscal decentralization and high under spending on core public services in TMC.