Urban fiscal policy in India remains poorly understood compared to many rapidly urbanising countries. Using underutilised data from the 2001 Census Town Directory and state legislative records, this study examines the level of fiscal transfers from states to urban centres across India to assess the factors which influence urban dependency. The study finds that urban centres depend on state grants for more than two-fifths of revenue, yet dependency levels vary greatly by the state. It presents the first national, empirical evidence of the determinants of city-level dependence on state government in India. The study also contributes to the very sparse literature on public finance for infrastructure in small- and medium-sized towns across developing countries.
