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The impact of conflict on city finances in India

Conflict has a limited impact on municipal finances in India but can affect the growth of resilient government structures. In Ahmedabad, in the state of Gujarat, sporadic conflict appears to have had little effect on the city’s robust finances. In Srinagar in the Kashmir valley, however, prolonged insurgency has prevented the development of infrastructure and sustainable self-governance.

New research from the Crisis States Research Centre based at the London School of Economics and Political Science in the UK sets out to develop a framework for understanding the impact of conflict upon local government structures and finances in India.

The study analyses the impacts of conflict within two case cities - Ahmedabad and Srinagar - in the context of Indian municipal structures. It reveals key issues confronting city finances as a result of conflict and highlights factors affecting the degree of impact. The study also asserts that the intensity and duration of conflict, and the strength of existing financial systems are key factors to consider.

Ahmedabad and Srinagar are contrasting case studies. Ahmedabad is one of the largest and most prosperous cities in Western India. It has also been the site of sporadic but fierce communal conflict over the last 40 years. Thousands of Muslims were massacred in the city during riots in 2002, in revenge for the burning of a train carriage filled with Hindu activists.

Srinagar, however, has seen conflict since the partition of the sub-continent in 1947. This city has suffered prolonged insurgency and the burden of supporting a large migrant population. It has a rudimentary municipal system that is being developed in challenging circumstances.

The research notes that:

The Ahmedabad city government enjoys a fair amount of financial devolution but Srinagar remains dependent on central and state government.
The state did not collapse in Ahmedabad following the 2002 riots: municipal structures and finances remained robust.
Prolonged violence in Srinagar has prevented the growth of sustainable self-governance.
Since the beginnings of militancy in Srinagar in the 1980s, infrastructure development (drainage, transport, health, and education) has been neglected.
Possible areas of impact in Ahmedabad such as property taxes require deeper research.

The research concludes with recommendations for policymakers and future researchers studying the impact of conflict upon fiscal systems. They should:

begin by understanding the degree of financial autonomy and strength of municipal finance structures
consider other environmental variables (such as the Gujarat earthquake in the case of Ahmedabad)
examine three elements of a municipal finance framework: administrative and institutional structures, sources of funds and use of funds
consider the intensity and duration of conflict and the strength of the municipal finance framework as two key factors for analysis
examine the powers of local institutions and interest groups that can influence resource mobilisation and allocation.

Source(s):
‘Multiple Finance Systems in Complex Cities: case studies on Ahmedabad and Srinagar, India’, LSE Crisis States Research Centre Working Paper No. 15, by Pritha Venkatachalam, July 2007 (PDF) Full document.

Funded by: LSE Crisis States Research Centre

id21 Research Highlight: 22 January 2008

Further Information:
Pritha Venkatachalam

Contact the contributor: prithav@gmail.com

Crisis States Research Centre, London School of Economics and Political Science, UK

The Editor
Crisis States Research Centre
DESTIN
London School of Economics
Houghton Street
London, WC 2A 2AE
UK

Tel: +44 (0)20 78494631
Fax: +44 (0)20 79556421
Contact the contributor: csp@lse.ac.uk

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