Revisiting the role of funding: Lessons from expenditure and performance on cleanliness in an inter-temporal setting

Executive Summary:

While urban population is consistently rising in India, urban services have not been able to keep up with the growing needs. For example, only 75-80% of municipal waste is collected, a marginal improvement from 72% in 2010, and out of this, only about 22-28% is processed and treated. There is near unanimity that Indian Urban Local Bodies(ULB) need more funding to deliver better. However, given the enhanced fiscal stress due to COVID and now due to the Russia-Ukraine war, unlikely that ULBs will see significantly more devolution of funds in the near to medium term. Service delivery needs to be improved urgently, since cities are estimated to contribute about 63% of our NDP and hence deterioration in service delivery levels will impact their growth potential. The question policy makers need to ask is, are there ways of improving service delivery, without spending more? Thankfully the answer is yes; and it has to do with improving the spend efficiency.

Comparing expenditure on SWM and cleanliness performance for 11 municipalities, we find out that there is no systematicity between increase in expenditure and improved performance. This reinforces the findings of our Working Paper last year, where we had analysed outcome and performance of 27 municipalities for 2016 and concluded that 19 of these 27 spend more than the benchmark amount on SWM and none have perfect score on cleanliness and higher expenditure explains 23% of variation in performance.

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