Moneycontrol | Lessons from China's support for local startups — a path to innovation for India

China's local governments drive innovation through fiscal autonomy, incentives, and policy experimentation. India can adopt similar reforms by enhancing fiscal power, creating innovation zones, and aligning municipal leaders’ incentives with startup growth to foster a competitive, innovative economy

By Arindam Goswami

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India’s local governments must do far better in raising revenues

Driving into Bengaluru’s city centre a couple of weeks ago after several months of working from home, I was pleasantly surprised to see well-demarcated parking spaces, electronic signs, and payment kiosks along MG Road. Brihat Bengaluru Mahanagara Palike (BBMP), our municipal corporation, had finally implemented a modern paid parking system, albeit only along a few major roads in the central business district. This being Bengaluru (the original home of the “we have an app for that" meme), the system allows you to discover available parking lots on your smartphone and pay the fees online.

The BBMP expects this system, implemented as a public-private partnership, to earn an annual income of ₹31.56 crores for the next ten years. That’s not a lot, but not bad either, considering that it was earning nothing from the public asset in the past. A few years ago, my colleagues at Takshashila estimated that the city could earn over ₹500 crores a year, or around 5% of BBMP’s approximate annual budget if it were to implement paid parking on just one side of a mere 3% of Bengaluru’s roads. Clearly, parking fees alone have the potential to be a significant part of the corporation’s budget. Indeed, there is a moral case for the government to implement paid parking—free parking is effectively an unthinking transfer of public wealth to an undeserving rich person. A car owner gets ₹30 per hour in implicit subsidy for every hour he parks on the public road, for no good reason. That’s not counting the economic costs of congestion and pollution arising from the overuse of an underpriced good. Contrary to popular belief, India’s municipal corporations are doing a public disservice by permitting free parking.Read More