Explanation:

 x The study titled “Report on municipal finances” reveals how municipal bodies are increasingly dependent on fund transfers from the State and the Centre, while their revenue-earning capacity is limited. Their revenue-raising powers are curtailed, the study shows. The combined budget of all the municipal corporations in India is much smaller than that of the Central and State governments according to the RBI analysis of the finances of urban local bodies. x Limited funds aside, about 70% of it gets spent on salaries, pensions, and administrative expenses with the rest left for capital expenditure. And above all, municipal corporations don’t borrow much, leaving them gasping for funds. x Taxes earned by municipal corporations in India are grossly inadequate to meet their expenditure needs. In India, the own tax revenue of municipal corporations, comprising property tax, water tax, toll tax, and other local taxes, formed 31-34% of the total revenue in the FY18-FY20 period. This share was low compared to many other countries and it also declined over time. x Using budgetary data from 201 municipal corporations across India, the RBI report calculated their overall revenue receipts — consisting of their own tax revenue, own non-tax revenue, and transfers. In 2017-18 (actuals), it was estimated to be 0.61% of the GDP and according to budget estimates for 2019-20, it increased slightly to 0.72% of the GDP. This was much smaller than Brazil’s 7% and South Africa’s 6%. x Large variations can be observed if the municipal corporations’ own tax revenue is sliced State-wise. The own tax revenue of municipal corporations as a share of the State’s GDP in 2017-18 crossed the 1% mark in Delhi, Gujarat, Chandigarh, Maharashtra, and Chhattisgarh, while it was 0.1% or less in Karnataka, Goa, Assam, and Sikkim. x Another major issue with the municipal corporations’ revenue-raising capabilities was their dependence on property taxes. In 2017-18, property taxes formed over 40% of the municipal corporations’ own tax revenue. Despite such dominance, property tax collection in India was much lower compared to OECD countries due to undervaluation, and poor administration, the report argues. x The shortage of tax collectors has further impacted the revenues. The corporations are mostly dependent on transfers with their revenue-raising potential being limited. Property taxes are not efficiently collected. The generated funds are mostly spent on revenue expenditure, leaving a much smaller pie for capacity building. x Municipal corporations need to explore different innovative bond and land-based financing mechanisms to augment their resources. In India, revenues of Municipal Corporations (MCs) are dominated by property tax collections and devolution of taxes and grants from upper tiers of government. MCs mostly rely on borrowings from banks and financial institutions and loans from Centre/State governments to finance their resource gaps in the absence of a well-developed market for municipal bonds,” it added. x Hence A is true but R is false.