Daily Editorial Analysis for 23th January 2023

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India’s urbanisation policies


A report by the World Bank, released in November last year, on financing India’s urban infrastructure needs, focuses on private investments ameliorating urban problems.

Key Highlights

  • The push to attract private capital, since the 1990s, followed by the urban reforms.
  • After three decades of reforms, urban finance predominantly comes from the government.
  • The finances needed to fund urban capital expenditures, 48%, 24% and 15% are derived from the central, State, and city governments, respectively.
  • Public–private partnership projects contribute 3% and commercial debt 2%.
  • Various reports have estimated a huge demand for funding urban infrastructure.
  • The Isher Judge Ahluwalia report says that by 2030, nearly ₹39.2 lakh crore would be required.
  • The 11th Plan puts forth estimates of ₹1,29,337 crore for four basic services, ₹1,32,590 crore for urban transport and ₹1,32,590 crore for housing.
  • A McKinsey report on urbanisation has a figure of $1.2 trillion, or ₹90 lakh crore

World Bank estimates

  • The World Bank estimates that nearly $840 billion (₹70 lakh crore) would be needed for investment in urban India to meet the growing demands of the population, and $55 billion would be required annually.
  • The flagship programmes of the government, the Smart City mission, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), the Pradhan Mantri Awas Yojana (PMAY), etc., are not more than ₹2 lakh crore (that too for a period of five years)

How will such a gap between demand and supply be matched?

  • Improving the fiscal base and creditworthiness of the Indian cities. Cities must institute a buoyant revenue base and be able to recover the cost of providing its services.
  • In simpler terms, it means increasing property taxes, user fees and service charges to name a few.
  • Reports point out that nearly 85% of government revenue is from the cities.
    • It means urban citizens are contributing large revenues even as the World Bank report’s emphasis is on the levying of more burdens in the form of user charges on utilities, etc.

What are the other ways?

  • Plans must be made from below by engaging with the people and identifying their needs.
  • Empowering the city governments and the people at large 74th Constitutional Amendment, chaired by K.C. Sivaramakrishnan, many suggestions were made such as empowering the people, transferring subjects to the city governments, suggesting that 10% of the income tax collected from cities be given back to them and ensuring that this corpus fund was utilised only for infrastructure building
  • This would ensure that city governments had an advantage in ensuring rapid transformation
  • Regular elections should be held in cities and there must be empowerment through the transferring of the three Fs: finances, functions, and functionaries.
  • Cities primarily are run by parastatals and the city governments hardly have any role to play in the smooth functioning of such parastatals.

An example of Shimla

  • The Shimla water works was transformed into a single utility in 2016­17, called the Greater Shimla Water Supply and Sewage Circle (GSWSSC) under the Shimla Municipal Corporation.
  • The Bank rendered help in the form of a soft loan, ensuring an adequate supply of water and proper distribution by the utility, but under the Shimla Municipal Corporation.
  • In 2017­18, it changed the character of GSWSSC to a company and formed the Shimla Jal Prabandhan Nigam Limited, now run under a board of directors, but outside the ambit of the municipality.


Such machinations shall not serve the purpose and will be perilous to the entire purpose of the urbanisation in India. The World Bank report is another reminder of the tragedy which Indian urbanisation is witnessing “policy paralysis from the top”.

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