Mumbai, India’s financial hub and the nation’s richest municipality, is exploring new ways to boost revenue as a slowing economy has hurt earnings from real estate. This includes tax on garbage collection and additional levies on services such as issuing birth certificates.

The Brihanmumbai Municipal Corporation, also known as the Municipal Corporation of Greater Mumbai, which covers half the area of the city of New York but houses 50 per cent more people, sees revenue dropping 5 per cent from its previous target to ₹23,850 crore ($3.4 billion) in the year through March 31.

Deteriorating finances in Mumbai — whose budget is bigger than several Indian states — bodes ill for India’s economic revival because State-level expenditure has a bigger impact than that of the Centre. Every 1 rupee spent by States yields 1.07 rupees in extra output, versus 0.4 for the Centre, according to a working paper published by the Reserve Bank of India.

Fall in revenues

For now, Mumbai plans to increase spending by almost 9 per cent in the year starting April 1, including on better storm-water drains to prevent flooding during the monsoon season, and an ambitious and controversial coastal road that will hug the city’s shoreline from Marine Lines called the Queens Necklace in the south to the crowded northern suburbs.

It is unclear though how it will achieve that goal given that tax collections on the sale of apartments and offices in the city missed the current year’s target by 12 per cent.

“Faced with a fall in revenues from the major sources of income, the Corporation plans to adopt innovative measures for resource mobilisation,” Care Ratings economists, including Madan Sabnavis, wrote in a report. These include measures to recover outstanding dues of property tax and water tax by the way of issuance of notices to defaulters, disconnection of water connections, attachments and auction of properties, they wrote.

Mumbai’s municipal body expects income on its ₹78670 crore of investments to drop 11 per cent due to lower bank interest rates in the next financial year. It also does not see any additional increase in compensation from the Centre.

Until 2017, Mumbai earned a third of its income through octroi, or an entry levy, which was replaced with a nationwide goods and services tax after Modi promised to compensate for a portion of the reduction.

India’s economic slowdown means the Centre has not been able to transfer the funds beyond September. The remainder will be issued in two tranches, Mos Finance Minister Anurag Thakur told parliament on February 3.

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