An autonomous research institute under the Ministry of Finance


Municipal Debt Financing in India

Publication date

Jan, 1998


Report submitted to the NIUA, USAID.


Narayanan Edadan and Om Prakash Mathur


The subject did not attract the attention of policymakers or academicia because the major part of the municipal infrastructure in the past was financed out of grants extended to municipalities by the state governments. The state governments did not encourage debt financing of infrastructure even for those municipal bodies which were statutorily permitted to borrow for specified purposes. Recent years have, however, witnessed significant changes in the country in the mode of municipal infrastructure financing. It is in this context that the NIPFP undertook with support from NIUA under the US AID-supported programme, a pilot study of municipal debt financing in 12 municipal corporations with a view to gain an initial understanding of issues concerning the subject of municipal debt. The study was designed to probe into issues, such as, the extent to which debt as an instrument is used for financing the infrastructure; the use to which debts have been generally put; and the impact of such debts on the revenue budget of municipalities.

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