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This article is targeted at exploring the Tax Increment Financing (TIF) model for financing planned urban development programs and projects in Indian cities—smart cities, in particular. This is founded on the premise that the TIF approach offers an excellent opportunity to Urban Local Bodies (ULBs) for the creation, capture and recycling of values in cities to support funding of core urban infrastructure in a sustained manner. This article identifies the key components of the TIF model and explains why it is a theoretically elegant and practically desirable strategy for potential acceptance by Indian cities at the present level of urban evolution when municipal finances are unstable and the municipalities are also not in a position to generate current tax income surplus. This article is grounded on the precept of "theory follows practice and vice versa", case studies on TIF as implemented internationally. In the end, this article suggests directions as to how the TIF principles could be integrated into the theoretical account of financing innovative projects under the Smart Cities Mission, including accessing capital market funds through municipal bonds. The key findings of this article suggest that the efficacy of tax increment financing tools in Indian cities will depend on several factors: the versatility of city development strategy and plan; reforms in municipal finance system; reforms in spatial planning; effective design of TIF projects and financing strategies, including mechanisms for value capture and recycling to catalyze economic growth‐enhancing enterprises that create further values to land‐owners and the city; and human resource capacity to plan, design, finance, implement and monitor projects. If planned well, TIF instruments can act as potent tools to augment external economies of agglomeration and networking and give a momentum to the economic growth, bringing forth a self‐financing or even surplus‐generating process of planned urban expansion, growth and reclamation.

Property tax is the most important municipal tax in India. Theoretically, property tax subscribes to efficiency, ability to pay, benefit and equity principles of public finance. However, it is grossly under‐exploited. The reasons why the potential of property tax is far from being realized include systemic problems and inefficiency in municipal tax administration. Considering the importance of property tax for municipal autonomy and its huge unexploited potential, property tax reform in India assumes critical significance. This paper attempts to look to theory and international practice, including innovative initiatives launched by select cities and states in India in the past for designing and pursuing a robust agenda of property tax reforms. In particular, it critically examines the property tax performance of two pioneering municipal corporations: Hyderabad and Bengaluru. We suggest municipal reforms with a focus on user charges for measurable services, move to capital value‐based property tax with land tax component linked to the market value of land, tax mapping and benchmarking, addressing tax base, exemptions, coverage, valuation and collection efficiency.

A conspicuous feature of cities in India is that the basket of revenue sources with municipalities is very narrow. However, the authorities have not exploited the revenue sources already available to them such as property tax, vacant land tax, and other land‐based revenue instruments. This is puzzling as land values in Indian cities are increasing exorbitantly, creating windfall benefits to landowners. The economic theory highlights the merits of land as a tax base to finance local public goods on efficiency, ability to pay, equity and benefit principles. Further, internationally, countries have successfully adopted land‐based instruments to finance, urban development projects during their urban transition. This article attempts to draw lessons from theory and practice for municipal finance reforms in India. As the context of fiscal federalism differs between countries, obviously not all revenue instruments adopted in other countries can be readily applied in India. Accordingly, we study the initiatives of Hyderabad and Bengaluru cities in using urban land as a resource to identify appropriate instruments for Indian cities. We combine theory with the practices followed by the two pioneering cities to suggest a reform agenda in India for designing land‐based tools to finance city infrastructure and services.

This study explains a novel glide path to model the stock prices of five major commercial banks in India. The purpose of this work is concerned with identifying the macroeconomic drivers of stock prices of five core banks listed in NIFTY50 index, namely, SBI, HDFC, ICICI, INDUSIND and KOTAK MAHINDRA, and to test their stability during periods of fiscal tension. The study utilized a Principal Component Analysis (PCA) of the respective stock prices and has proceeded with the multivariate method to make the required predictions. The choice of statistical technique primarily consists of decomposing the respective stock prices of the five banks using PCA and then selecting one optimal Principal Component (PC1). A multivariate regression model is employed to predict the optimal PC of such stock prices in which PC1 is the dependent variable and NIFTY50 and INR‐USD is the independent variables. Ultimately, the optimal PC is returned to the stock prices of the corresponding levels. The model is set up to be performed comfortably and the hardiness of the model is supported from various selection criteria; particular, the model assumption testing, goodness of fit, sample stressed period (using Rolling Average method on Indian VIX: 2008:Q1 to 2009:Q2) testing and out of sample performance. In addition to this, the estimated results are consistent with Monte‐Carlo simulation results. The envisioned model satisfies the model objective, while sufficiently capturing the historical dynamics of the stock prices as reflected by various performance indicators (RMSE, MAPE, RMSE over standard deviation) presented in this paper.