Author: Debdulal Thakur
India’s urban funding formula relies heavily on population, but millions of people cross municipal boundaries daily to work and access services. In Census 2027, the challenge is to measure not just where people live, but where the costs of serving them fall—and how these responsibilities should be shared
What if the population counted by a city is not the population for whom it must pay? Every morning, workers enter Bengaluru, Chennai and Mumbai from neighbouring jurisdictions. They use roads, transport networks, sanitation facilities and public spaces before returning home. Their residential municipality counts them; the city where they work bears part of their service costs. The problem is not that these people are statistically invisible. It is that their movement across administrative boundaries may remain fiscally invisible.
Census 2027 makes this distinction particularly consequential. After a 16-year gap, India will refresh the demographic evidence underpinning public planning. Meanwhile, the Sixteenth Finance Commission has recommended Rs 3,56,257 crore in urban local-body grants for 2026-31. For distributing basic and performance grants among States, its formula assigns 90% weight to projected urban population and 10% to an own-source-revenue-based index. Within States, accepted State Finance Commission recommendations take precedence; a similar formula applies otherwise. The arithmetic is defensible. Population offers predictability and an essential measure of need. But does residential population adequately represent the costs of servicing an economy increasingly organised across municipal boundaries?
What India's numbers reveal?
The problem has an empirical foundation. The Economic Survey 2016-17, using railway passenger data, estimated approximately nine million annual interstate work-related migrant movements during 2011-16, against roughly four million suggested by conventional Census estimates. These are historical estimates of migration flows, not daily commuter counts. Their significance lies elsewhere: the movement of people can look substantially different depending on how it is measured.
Indeed, Census 2011 already recorded workers' commuting distances and modes of travel, including urban-agglomeration information. Yet distances and transport modes alone cannot reliably establish which municipality provides services to a worker. Nor do interstate migration estimates reveal the daytime populations of individual cities.
This distinction is decisive. Without knowing both where journeys originate and where they end, policymakers cannot adequately estimate the cross-boundary distribution of service demand. The financial implications warrant investigation. The Reserve Bank of India's 2024 study of 232 municipal corporations found that most could not finance revenue expenditure from their own-source revenues alone. These findings demonstrate municipal fiscal vulnerability, although they do not establish how much of the shortfall results from commuting or migration. That question remains unmeasured.
Consider two adjoining municipalities. One houses a large workforce; the other provides much of its employment. The former incurs costs for housing-related infrastructure and neighbourhood services, while the latter accommodates daytime traffic, commercial activity and waste generation. Both benefit economically, but their costs and revenues may be distributed unequally. The issue, therefore, is not whether commuters impose costs. It is whether the net costs, after accounting for revenues and economic benefits, are recognised in intergovernmental financing.
Count residence, measure responsibility
India needs to distinguish three concepts: residential population, the effective population using particular services, and the population implicitly recognised by fiscal allocations.
These categories overlap but are not interchangeable. Drinking-water requirements depend largely on residential and institutional consumption; road congestion reflects vehicle movements; waste generation depends on households and economic activity. There can be no scientifically defensible single multiplier that converts every visitor into another resident. Two implementable changes could begin addressing this gap. First, attach a representative mobility supplement to Census 2027. Since the main population-enumeration questionnaire has already been notified, the Registrar General could undertake a separately authorised, post-enumeration sample survey across selected metropolitan regions. It should record the localities of usual residence and principal workplace or study, commuting frequency, transport mode and temporary stays. Geographical coding would permit estimation of cross-municipal flows without adding substantial questions to every household's Census interview.
The exercise should publish anonymised, aggregated origin-destination matrices, with statistical safeguards and explicit confidence intervals. Its purpose would be planning, not monitoring individual movements. Existing Census commuting tables provide a starting point; improved destination information would supply the missing dimension. Second, translate these estimates into a metropolitan fiscal-responsibility account. State Finance Commissions, working with municipalities and metropolitan planning bodies, could compare estimated cross-boundary service demand with actual expenditure, user charges, taxes and other revenue benefits. Pilot accounts in Bengaluru, Chennai and Mumbai could identify whether particular transport corridors, markets or employment centres generate demonstrable net fiscal burdens.
Where evidence establishes such burdens, States could finance shared infrastructure or introduce limited, audited service-demand adjustments to municipal transfers. The purpose should be cost-sharing, not automatic grants for every commuter.
The danger of rewarding congestion
Such reform requires caution. Large cities already attract investment and revenue; mechanically rewarding daytime population could deepen inequalities with smaller towns. It might even reward congestion instead of better planning. Informal workers, women undertaking unpaid journeys and people using non-digital transport could also disappear from poorly designed mobility estimates.
Any fiscal adjustment must therefore be service-specific, independently audited and accompanied by protection for disadvantaged residential jurisdictions. More importantly, States must strengthen municipal revenue collection and service accountability. Better population measurement cannot substitute for either.
The Sixteenth Finance Commission already recognises rural-urban transitions through its Rs 10,000-crore urbanisation premium. Cross-boundary mobility presents a related but different challenge: urban responsibilities can change even when municipal boundaries do not. Census 2027 should therefore do more than improve the accuracy of India's population count. It can establish the evidence needed to assess where municipal responsibilities arise and how they should be shared.
India's cities do not stop serving people at their administrative boundaries. Its public finance should begin recognising that reality.
India needs to distinguish three concepts: residential population, the effective population using particular services, and the population implicitly recognised by fiscal allocations.
These categories overlap but are not interchangeable. Drinking-water requirements depend largely on residential and institutional consumption; road congestion reflects vehicle movements; waste generation depends on households and economic activity
The writer is Professor and Director, Centre of Excellence (CoE) for Public Policy, Sustainability, and ESG advances research, Alliance University, Bengaluru; Views presented are personal.