Extending key roadways in Mumbai is forcing the city to come up with higher taxes, including on garbage collection. Image Credit: Pixabay

Mumbai (Bloomberg): Mumbai is exploring new ways to boost revenue as a slowing economy hurts earnings from real estate. This includes tax on garbage collection and additional levies on services such as issuing birth certificates.

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 238.5 billion rupees ($3.4 billion) in the year through March 31.

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

Deteriorating finances in Mumbai - whose budget is bigger than several Indian states - bodes ill for India’s economic revival because local expenditure has a bigger impact than that by Prime Minister Narendra Modi’s administration. Every 1 rupee spent by states yields 1.07 rupees in extra output versus 0.4 for the federal government, according to the Reserve Bank of India.

Spending hike

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 city’s annual monsoon, and an ambitious coastal road that will hug the city’s shoreline from Marine Lines in the south to the crowded northern suburbs.

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