Building Block By Block

It Can be aptly said that a nation’s economic growth is reflected in its infrastructure. To begin with we need to ask why India needs improvement in urban infrastructure. Nearly 31 per cent of India’s current population lives in urban areas contributing to 63 per cent of India’s GDP (Census 2011) and with increasing urbanisation, urban areas are expected to house 40 per cent of India’s population and contribute to 75 per cent of India’s GDP by 2030.

India’s urban growth is largely concentrated in large cities with a population of 100,000 or more, the number of cities with a population exceeding 1 million has increased from 35 in 2001 to 53 in 2011, accounting for 43 per cent of India’s urban population and is expected to be 87 by 2030. The 11th Five-Year Plan envisioned Indian cities to be the engine of economic growth over the next two decades.

However, Indian cities have to be more liveable, bankable and competitive in the years to come to match with the projected economic growth.

Unfortunately, infrastructure development in Indian cities is paltry and requires focused attention. The double digit growth rate that the country envisions in the coming decade faces immense infrastructural bottlenecks in cities. The larger cities attained inordinately large population sizes that have led to virtual collapse of urban services and social infrastructure.

Urban India today is “distributed” in shape—with a diverse range of large and small cities spread widely around the nation. The speed of urbanisation poses an unprecedented managerial and policy challenge—yet India has not engaged in a national discussion about how to handle the seismic shift in the makeup of the nation. India will probably continue on a path of distributed model of urbanisation because this suits its federal structure and helps to ensure that migration flows aren’t unbalanced toward any particular city or cities. Recent reports suggest that India spends $17 per capita per year on urban infrastructure, whereas the most benchmarks suggest a requirement $100. Now how will this huge gap be bridged?

In general, it wouldn’t be wrong to say that our execution in terms of urban reforms at the municipal and state level has been inadequate. The various areas of management that we need to work on include: inclusive cities, urban governance, funding, planning, capacity building, education, healthcare and low-income housing. India also needs to start a political process where urban issues are debated with evolution of meaningful solutions.

Meaningful reforms have to happen that enable true devolution of power and responsibilities from the states to the local and metropolitan bodies. This is because by 2030, India’s largest cities will be bigger than many countries today. India’s urban governance of cities needs an overhaul.

Devolution has to be supported by more reforms in urban financing that will reduce cities’ dependence on the Centre and the states and unleash internal revenue sources. Consistent with most international examples, there are several sources of funding that Indian cities could tap into, to a far greater extent than today: monetising land assets; higher collection of property taxes, user charges that reflect costs; debt and public-private partnerships (PPPs); and central/state government funding.

India has the potential to unlock many new growth markets in its cities, many of them not traditionally associated with India, including infrastructure, transportation, healthcare, education, and recreation. To meet the urban demand, the economy will have to build between 700 million and 900 million square metres of residential and commercial space a year.

Cities can also deliver a higher quality of life. Urban scale benefits mean the cost of delivering basic services is 30 to 40 per cent cheaper in concentrated population centres than in sparsely populated areas. But to reap such benefits, India needs to meet an unprecedented policy challenge. If it fails to do so, this could seriously jeopardise its growth and risk high unemployment. Apart from that there are serious concerns for a stable policy to bring in private investment for developing the urban landscape which faces a fund shortage of $110 billion, according to a report.

Although urban India has attracted investment on the back of strong growth, its cities are still failing to deliver even a basic standard of living for their residents after years of chronic underinvestment. Unless it steps up investments in its cities, India could well lose the productivity dividend of urban living. Today, in per capita terms, India’s annual capital spending of $17 is only 14 per cent of China’s $116 and less than 6 per cent of New York’s $292.

India needs to invest $1.2 trillion in capital expenditure in its cities over the next 20 years, equivalent to $134 per capita per year, almost eight times the level of spending today. If India taps into five sources of funding used in cities around the world—monetised land assets, higher property taxes, user charges that reflect costs, debt and public-private partnerships, and formula-based government funding—its largest cities could generate as much as 80 per cent of the funding they require from internal sources.

Urban Infra Conclave 2017 powered by YES BANK, aims to bring the best minds from healthcare, hospitality, real estate & education to chart the desired roadmap for the next phase of policy & institutional changes and together essay a key role in re-defining the urban infra landscape in India.