According to the 1991 Census of India, there were 3255 urban local bodies (ULBs) in the country; classified into the four major categories of:
- Municipal corporation (Nagar Nigam)
- Municipality (municipal council, municipal board, municipal committee) (Nagar Parishad)
- Town area committee
- Notified area committee
The municipal corporations and municipalities are fully representative bodies, while the notified area committees and town area committees are either fully or partially nominated bodies.
As per the Constitution of India, 74th Amendment Act of 1992, the latter two categories of towns are to be designated as municipalities or nagar panchayats with elected bodies. Until the amendments in state municipal legislations, which were mostly made in 1994, municipal authorities were organised on an ultra vires (beyond the authority) basis and the state governments were free to extend or control the functional sphere through executive decisions without an amendment to the legislative provisions.
After the 74th Amendment was enacted there are only three categories of urban local bodies:
- Mahanagar nigam (municipal corporation)
- Nagar palika (municipality)
- Nagar panchayat (notified area council, city council)
This article provides that there be a nagar panchayat for transitional areas i.e. an area in transition from rural to urban, a municipality for a smaller urban area, and a municipal corporation for a larger urban area. Article 243Q of the 74th Amendment requires that municipal areas shall be declared having regard to the population of the area, the density of population therein, the revenue generated for local administration, the percentage of employment in non-agricultural activities, the economic importance or such other factors as may be specified by the state government by public notification for this purpose.
Among all urban local governments, municipal corporations enjoy a greater degree of fiscal autonomy and functions although the specific fiscal and functional powers vary across the states, these local governments have larger populations, a more diversified economic base, and deal with the state governments directly. On the other hand, municipalities have less autonomy, smaller jurisdictions and have to deal with the state governments through the Directorate of Municipalities or through the collector of a district. These local bodies are subject to detailed supervisory control and guidance by the state governments.