Fixing Our Cities For Sustainable Growth

India has experienced a steady acceleration in growth from an average of 5.6 per cent per annum in the 1990s to 7.7 per cent per annum in the subsequent decade from 2001-02 to 2010-11.

Growth slowed down from 2011-12 onward and has picked up more recently, but India continues to be a fast growing country compared to the rest of the world. However, problems of poor infrastructure and difficulties of doing business remain.

What is more, the economy now faces headwinds of a worsening protectionist external economic environment and increasing vulnerability in the banking sector.

International agencies project that India could continue to grow at just below 7 per cent per annum and government spokesmen have talked about growth of GDP between 7.5 and 8 per cent per annum. The latter is not impossible but it will require major efforts to push reforms and remove distortions.

Rapid growth will in turn present sustainability challenges in terms of switching to renewable energy, managing the increasingly scarce water resources, and dealing with the challenges of urbanisation which is bound to gather momentum as growth gets back on its trajectory of 7.5 to 8 per cent per annum. We focus on the specific challenges posed by the lack of preparedness of our cities to support and sustain the rapid growth.

There is a growing realization that urbanisation is set to accelerate with India’s rapid growth, but there is still inadequate understanding of the need to plan for urbanisation and translate these plans into action so that our cities can provide better investment climate and better quality of life to their residents.

Unsafe and inadequate water, poor sanitation and heavily polluted air have come together to create an urban environment that is a major health hazard. The challenges of mobility and shelter further add to the litany of urban woes.

Such an environment cannot offer the so-called agglomeration economies which attract entrepreneurs and skilled professionals to locate economic activity in cities.

A few cities like Bengaluru, Hyderabad, Chennai, Mumbai, Pune, Ahmedabad and Delhi which fueled India’s growth momentum, are now wreathing under the strains of congestion diseconomies and poor public services resulting from lack of urban planning and management.

There are many technical fixes to the problems but the fundamental lacuna is that urban local governments, which have the constitutional mandate for urban planning and delivery of public services, are financially broke and not empowered either through devolution of funds from state governments, or through the necessary autonomy to raise funds through municipal taxes, user charges, unlocking land value through land zoning, etc. to mobilise financial resources for investments in infrastructure that are needed.

GST has also been a missed opportunity because state governments and the Government of India together have made no provision for ensuring a certain minimum transfer of GST revenues from state governments to local governments.

Building capacity for urban planning and management at the local government level to deal with the growing challenges of urbanisation, is another area which requires urgent attention of state governments as well as the Government of India.

Following the completion of JNNURM which was a reform-linked but project-based national mission for urban renewal from 2005 to 2014, the Government of India has announced a number of new initiatives directed at urban rejuvenation – the Swachh Bharat Mission, AMRUT (essentially a successor to JNNURM), Smart Cities Mission (an area-based program for smartening up parts of cities through introduction of high technology solutions) and Housing for All.

Unfortunately these missions are heavily under-funded and have not incorporated the lessons from the successes and failures of JNNURM. They present a fragmented approach when the problems are crying for solutions which need to be integrated across sectors and across the three levels of governments.

The faith in public private partnerships to bridge the financing gap is misplaced unless urban governance reforms including the empowerment of cities result in a revenue model (based on user charges covering at least operations and maintenance costs) which finds takers in the private operators/partners and users of public services.

Getting urbanisation right is not just a solution for Indian cities, but the fortunes of the rural sector are also tied with how urbanisation unfolds for sustainable growth.