It is one small step in diversifying the instruments available in the debt market, but a significant stride for fuelling urbanising India’s engines of growth: our extant and future cities. The recent maiden debt listing of municipal bonds, or munis, on the NSE, of Indore Municipal Corporation, is path-breaking in that it creates a market for municipal bonds. Indore and a few other urban bodies in Madhya Pradesh reportedly plan to raise Rs 1,200 crore via munis. There’s a huge resource gap nationally when it comes to municipal bodies, and munis can be a viable financing option for well-structured urban development projects. Provided, local governments have the fiscal capacity to service the bonds they issue.

In fast urbanising India, the combined revenue receipts of all municipalities add up to under Rs 1,50,000 crore, less than 1% of GDP, with less than a third of the funds locally raised. Estimates suggest that the investment requirement is far higher, over 2% of GDP annually. The way forward is to use urban planning tools to renew and expand our cities, improve neighbourhoods and increase property values. The policy focus needs to be to boost municipal revenues from property tax collections, reasonable user charges and shares in the taxes collected by state governments. Besides, given the huge infrastructural deficit, say, for urban public transport, solid waste management and sewerage treatment, munis can provide stable long-term returns to create energy-efficient and climate-friendly infrastructure. But, in tandem, we need transparency in municipal finances and standardised norms for budgeting and disclosure.

There are over 4,000 urban local bodies nationally, and over 160 municipal corporations. These need capacity building as well as political reform and empowerment, complete with participative democracy in local government, so that there is the necessary political will for creating and running efficient towns and cities, to enhance liveability, creativity and economic output. Future prosperity depends on it.