In the piece on Constitution and the 74th CAA we discuss how the 74th CAA came to be. But, why was the 74th CAA needed?

Lack of focus on the Urban

Decentralisation was an aspect that national policy makers adopted since India’s independence, but focussed significantly more on rural self governing bodies than urban ones. While devolution of powers to panchayats was an aspect of the Directive Principles of State Policy, the same was not mentioned for urban areas, i.e. urban local bodies (know more). Urban local bodies are referred to in the State List under Schedule 7 which implies that state governments have control over local governments. In the first five decades of independence, urban governance was not a priority. State governments maintained control of cities as local governance remained a state subject. Urban areas ended up getting less importance than rural areas in national policies regarding governance.

In 1951, the urban areas constituted 17.3% of the total population of India, which grew to 25.7% in 1991 (Census of India). This increase in urban population underlined the need for more empowered urban local governments.

No Constitutional Recognition of Urban Self Governance

Prior to the 74th CAA, the municipal governments lacked any constitutional recognition and depended on the state governments for their establishment, as well as administrative and fiscal decisions. The concept of a municipal government as an autonomous body did not exist before the introduction of the 74th CAA. This lack of recognition meant that the states were not mandated to set up city governments while there existed the mandate to constitute panchayats. This resulted in erratic or no elections in the cities for municipal governments.

While there were attempts to give constitutional recognition to urban local governing bodies prior to this they didn’t not convert to an Act. The 65th Constitutional Amendment Bill in 1989 was passed in the Lok Sabha, but did not get passed in the Rajya Sabha. The 74th CAA built on the provisions suggested by the Bill, with some modifications.

Lack of Fiscal Autonomy

There was no mechanism like the State Finance Commission (SFCs) in place for local governments. Without SFCs, the municipal governments were entirely dependent on the discretion of state governments for financial aid.

The need for constitutional safeguards to ensure regular elections and increased fiscal autonomy for municipalities was felt. With disproportionate discretionary powers in the hands of State Governments, the local level of democracy in urban areas suffered.