Reimagining City Budgets Through Citizen Participation
- 2 days ago
- 9 min read
India’s urban growth is stifled by a systemic fiscal paradox: while cities drive the economy, municipal finances have stagnated at 1% of GDP for decades. This financial condition is doubled by a lack of agency within Urban Local Bodies, which remain tethered to state and central capitals, stripped of the power to tap into productive revenue streams like GST. Reclaiming our cities requires moving beyond passive governance toward active citizen participation in financial planning. By transitioning from taxpayers to stakeholders and demanding fiscal decentralization, residents can ensure the wealth generated on their streets finally returns to fix them.
Every year in February-March, India’s collective attention turns toward the Union and State budgets. News channels run marathon sessions, analysts decode tax slabs, and the public debates the vision for the nation’s economy. Yet the municipal budgets that govern our immediate reality, determining whether our taps run with clean water, whether our streets have lights, or whether our waste is cleared, receive no such attention.
Municipal budgets, which collectively handle between ₹1.5 and ₹1.8 lakh crore annually, are perhaps the most neglected documents in Indian democracy. While we debate national fiscal deficits, India’s 4,500+ municipalities often struggle to maintain even the basics of urban life, such as functional drainage, paved internal roads, and reliable street lighting.
It wasn't supposed to be this way. In 1992, the 74th Constitutional Amendment envisioned Urban Local Bodies (ULBs) not as mere administrative outposts, but as a legitimate third tier of government that could function as institutions of self-government.. At the heart of this vision were Ward Committees: small, neighbourhood level platforms where citizens could participate in the planning and spending of their own money.
For most of India, this constitutional mandate remained a 'paper tiger' as state governments have been reluctant to cede power or purse strings. A few pioneering regions showed what was actually possible.In 1996, Kerala’s People’s Planning Campaign decided to transfer nearly 35-40% of the state’s budget directly to local bodies for spending according to ward-level priorities. Since then, cities like Bengaluru and Pune have experimented with Participatory Budgeting, in which citizens propose small projects for their neighbourhoods.
However, thirty years later, these success stories remain the exception. For the vast majority of Indian cities, planning remains a top-down, secretive exercise. The problem is twofold: first, our cities are chronically underfunded; second, when they do have money, they have to spend it on projects the people didn't ask for. This results in a severe disconnect where grand announcements are made while the issues citizens face every day go unfunded.
Top-Down Budgets Often Fail
Cities often allocate funds in ways that do not align with their most pressing needs, largely because they operate under tight financial constraints. Urban finance experts point out a glaring anomaly: India’s cities drive the economy, yet growth of municipal finances have flatlined at just 1-1.5% of the GDP for the last 24 years. Our system of public finance is top-heavy. The Centre and the States retain most tax revenue, while local governments are left with limited resources to manage them.
State governments have systematically stripped cities of their own revenue sources. Even during the rollout of GST, cities were entirely excluded; there is no Local GST. You buy a house and drive a car in the city, but the stamp duties and vehicle taxes go straight to the state capital. The local municipality is left to fix the roads, armed with little more than property taxes. While the "1% of GDP" figure is a national average, it masks a much harsher reality for smaller municipalities. If the metros are struggling, the smaller cities are effectively gasping for air.
Municipalities largely depend on financial grants. But this perceived dependence of ULBs on intergovernmental transfers is a result of asymmetric tax assignment. Most buoyant direct and indirect taxes are reserved for higher tiers of government, creating a scenario where cities bear the burden of infrastructure costs without the benefit of the revenue generated within their boundaries. While cities in federal systems like Germany, Brazil, or the US often have a constitutional claim to a share of local income or sales taxes, Indian municipalities are excluded from these high-growth revenue streams.
Even the grant money comes with a catch: it has largely arrived as tied grants, strictly earmarked for specific, top-down schemes. To unlock these funds, a city must mould its budget around pre-designed priorities which are often decoupled from local geographies and spelled by broad, 'one-size-fits-all' national or state mandates. If a national mission demands 'smart' technology, a city will propose digital command centres to avail the funds, even if its most desperate need is desilting everyday drains.
Most states have practised selective devolution, handing over tasks like managing burial grounds, cattle pounds, and solid waste. Meanwhile, the big-budget functions, such as transport, water supply, and town planning, have been firmly under the control of unelected parastatal agencies, such as Water Boards or Development Authorities.
The financial scale of this bypass is staggering. A World Bank Report (Financing India’s Urban Infrastructure Needs, 2022) revealed that unelected parastatals account for over half (53%) of total urban capital expenditure across India, while the share managed by elected municipalities has shrunk to under half.
Need for local awareness
Even if a citizen wants to get involved, the documents themselves push them away. Municipal budgets are packed with accounting codes, financial jargon, and endless spreadsheets. This technical language locks the average person out of the conversation. In fact, even elected ward councillors often struggle to understand the very budgets they vote on. If you can’t read the document, you can’t question the spending.
The first step is breaking down this complex language so anyone can understand what is being proposed. But decoding the text is only half the battle; actually finding the documents is just as hard. Looking up a city budget online is notoriously difficult. For many smaller cities, there is no publicly available information about the budgets. Many municipal websites are completely outdated, with some still displaying budgets from 2018-19 as their most recent uploads. In others, the reports are deep within clunky portals, or only keep a few English-heavy physical copies locked up at the city hall.
Real participation means publishing these documents in simple formats and local languages. Take the case of Chittur-Thathamangalam (CTM) in Kerala. When the state proposed a new master plan, the municipality translated the highly technical, English-only Draft Plan and maps into Malayalam, holding cluster meetings to help residents actually understand and audit the document. People shouldn't need a finance degree to see how their own taxes are spent on their own street. A city budget needs to be as easy to read as a household bill.
Public Participation vs. The Illusion
When cities do hold public consultations, they often serve as mere on-paper rituals to tick a statutory box. This tokenism creates a massive trust deficit. In Mangaluru, for example, a pre-budget meeting drew just a dozen attendees. Citizens stayed away because they felt the bureaucracy had a long history of simply ignoring their previous suggestions, making the whole exercise feel pointless.
However, the few who attended in Mangaluru showed why citizen participation is essential. They did not limit themselves to asking for parks or roads but asked also about the city's financial capacity and served as stewards of its needs. One resident flagged that 5,000 houses were drawing municipal water without meters, exposing a significant revenue gap. Rather than pressing for new projects, they urged the city to plug these leakages before seeking additional state grants. This concern is not isolated; data indicate that Indian municipalities collect only about 25% of their potential property tax.
When citizens are actually equipped to understand the plans, it leads to action. Returning to the Chittur-Thathamangalam (CTM) in Kerala: the state’s original 2031 Draft Master Plan would have widened 27 roads, threatening to destroy 80% of the town's local retail economy. Because the community could actually read and audit the translated documents, they rejected it. Following a 10-month participatory process, beginning with a 'People’s Audit' of the state's draft—the municipality used grassroots data and focus groups to craft the 'People's Plan 2042.' This alternative successfully pivoted the town's focus toward pedestrian networks and the conservation of its 171 local ponds.
Emerging Frameworks for Authentic Devolution
While the broader picture often looks bleak, a few municipalities are proving that true decentralisation works when the political will exists. In Mizoram, the Lunglei municipality has allocated 80% of its property tax collections directly to ward committees. Other states are using financial contributions to build a sense of public ownership. Tamil Nadu’s Namakku Naame Thittam scheme requires citizens to cover at least one-third of the cost for local community infrastructure. When people pay out of their own pockets, they ensure the project is built well and actually maintained, solving the chronic issue of abandoned government assets.
Modern city budgets are also being used as smart tools to encourage good civic behaviour without resorting to blanket tax hikes. Guwahati, for example, offers property tax rebates for homes with rainwater harvesting systems, while Lucknow provides a 10% discount on house tax for residents who install solar panels.
Another example of innovation comes from Pimpri Chinchwad. In 2026, the Pimpri Chinchwad Municipal Corporation (PCMC) did something highly unusual for an Indian city: it deliberately cut its budget by ₹353 crore. The corporation refused to announce any flashy new projects, instead focusing entirely on completing pending works. The PCMC integrated nearly 300 direct citizen suggestions into the final ledger from almost 5000 suggestions made by citizens. The number of citizen suggestions were almost double of the ones that were received from citizens in the previous year.
Moving from Tokenism to Co-Creation
To make these success stories the norm, there is a need to build both capacity and intent in the process of budgeting. Capacity of the city governments to have strong searchable data, intent signalled by systems like better timelines for citizens to be able to contribute or legal backing for the participatory process.
The very timeline for drafting a budget can be worked to include time and space for citizens to read, analyze and engage with it. Currently, city councils release the draft budget just days before it is passed, leaving no room for meaningful public input. Taking a cue from Kerala’s early People’s Plan Campaign, the state must announce the financial envelope for each municipality well in advance. When wards know exactly how much money is available, they can hold neighbourhood meetings months in advance to discuss and draft their own projects.
However, this participatory process needs a legal lens. Urban governance experts argue that a statutory minimum must be set; for instance, by legally reserving 5% of a municipality's capital budget for Ward Committee allocations. On a national scale, this simple rule would unlock over ₹7,500 crore directly into citizens' hands.
But giving local wards money is only part of the solution; they also need the technical ability to spend it well. Currently, nearly 40% of central urban development funds remain unspent because municipalities lack the planners, engineers, accountants and other key skill sets to execute projects. To bridge this capacity gap, cities can look directly at the Chittur-Thathamangalam (CTM) model. The town utilised a ‘Volunteer Technical Corps’, leveraging local pro bono architects, university students, and retired engineers to help citizens turn their raw ideas into technically sound, executable plans.
Furthermore, ward plans should not devolve into random wish lists. Budgeting must be based on verifiable evidence. Cities like Pune, Jamshedpur, Surat, Ahmedabad, Bhubaneswar, Bhopal, Chennai, and Vijayawada took a massive step forward here by achieving the WCCD ISO 37120 certification, which ensures their civic data is standardised and independently verified. When citizens have access to this kind of tamper-proof data, they can base their financial demands on actual, documented neighbourhood deficits rather than political promises.
Finally, true decentralisation means giving citizens leverage over the execution, not just the planning. Municipal by-laws must be amended to mandate strict 'social audits'. Citizens must have the legal authority to certify contractor bills (verifying that the drain was actually cleared, or the road was paved to standard) before the city releases the final payment.
A city budget is not just a spreadsheet; it is a direct document between the government and the people. When handled without citizen input, daily survival (clean air, safe roads) is compromised.
Cities can no longer treat their residents as a mere 'body' to be managed, taxed, and occasionally consulted. To fix our urban infrastructure, the people must become the 'government', reclaiming their rightful place as the primary decision-makers and builders of their own neighbourhoods.
Laws like the 74th Amendment are just ink on paper if they aren’t used. As the pushback in Kerala and Mangaluru shows, the state machinery rarely decentralises financial power voluntarily. It must be actively demanded and claimed by a watchful, mobilised public.
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