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Cities As Engines Of Growth

NITI Aayog CEO Amitabh Kant and Viraj Mehta write that urbanisation will be a key driver of growth.

The skyline of Mumbai city (Photographer: Abhijit Bhatlekar/Bloomberg News)
The skyline of Mumbai city (Photographer: Abhijit Bhatlekar/Bloomberg News)

Urbanisation To Drive India’s Growth

Over the next two decades, India needs to grow sustainably at nine to 10 percent in order to realize the full potential of its economy and demography. Such high level of growth will come from industrial and service sectors. Also, this growth needs to come with full employment, as the country needs to create approximately 10 million new jobs every year to provide meaningful employment to the growing youth population. Global experiences reveal that growth in industries and services invariably takes place in cities due to agglomeration economies, increase in productivity, innovations and entrepreneurship. Thus urbanisation is a key driver of growth.

India is urbanising very fast and as per UN Habitat Report of 2016, about 32 percent (420 million people) of population is living in urban areas. As per projections, the urbanisation level is expected to cross 50 percent by 2050 when one out of every two Indians would be living in cities. There is a mega wave of urbanisation on the anvil that needs to be managed well so that cities can attract investments, become hubs of growth, talent, creativity and innovation, thereby creating vibrant habitats for millions of citizens, including those moving from rural to urban areas in anticipation of promising opportunities.

Towers stand among other residential and commercial buildings in the Mahalaxmi area of Mumbai. (Photographer: Dhiraj Singh/Bloomberg)
Towers stand among other residential and commercial buildings in the Mahalaxmi area of Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Challenges Of Urbanisation

But, urbanisation poses its own challenges which need to be addressed to harness its full potential. With the rising urban population in cities, there is increased pressure on the basic infrastructure and services like water, sanitation, waste management, housing and transportation. Cities lack severely in holistic spatial plan preparation, implementation and enforcement and this is leading to sprawling, low density and haphazard development. The existing infrastructure in Indian cities is overstretched and creaking and cities are not able to deliver basic amenities like clean water, sanitation, housing and public transport to all the citizens particularly the urban poor. As per census 2011, only 71 percent of urban households has access to piped water supply and 12 percent households are covered by sewer connection. About 17 percent of urban population is living in slums, which is a cause of concern as it can lead to social unrest. There is shortage of about 2 crore houses in urban areas and a major part of this i.e. 96 percent is in economically weaker sections and low income groups.

The Bandra Kurla Complex rises in the background, behind the slum dwellings of Dharavi, in Mumbai. (Photographer: Prashanth Vishwanathan/Bloomberg)
The Bandra Kurla Complex rises in the background, behind the slum dwellings of Dharavi, in Mumbai. (Photographer: Prashanth Vishwanathan/Bloomberg)

Further, the pollution of land, air and water is leading to serious public health and sustainability issues. Increasing air pollution (particulate matter 2.5) due to traffic congestion and vehicular exhaust, discharge of untreated effluence and sewage in water bodies and insanitary landfills due to non-scientific disposal of solid waste are serious issues which need to be immediately addressed. There is a social dimension also associated with increasing urbanisation which manifests in the form of increasing slums and a large population of urban poor getting excluded from the formal city space. The economic, social and environmental dimensions associated with urbanisation would need to be balanced and managed well to reap its full benefits.

Urban Rejuvenation In India

Realising the importance of managing urbanisation and transforming the urban landscape in the country, Government of India in June 2015, launched three mega urban sector programmes: Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Smart Cities Mission, and Housing for All to radically transform the urban landscape.

AMRUT

The mission aims to provide basic infrastructure like piped drinking water, sewerage/septage, storm water drains, green and open spaces and non-motorised transport in about 500 class I cities. The priority is on providing universal coverage for piped drinking water and sewerage/septage. The mission also looks to incentivize urban sector reforms to improve governance. 10 percent of funding is linked to implementation of reforms. Central government would be spending Rs 50,000 crore on the mission in 5 years and matching amount would come from the state and urban local bodies. So far total investment of Rs 44,401 crore has been approved under the mission.

A girl drinks water from a faucet. (Photographer: Dhiraj Singh/Bloomberg)
A girl drinks water from a faucet. (Photographer: Dhiraj Singh/Bloomberg)

Smart Cities Mission

The mission aims to create 100 cities of excellence in the country. The mission brings a paradigm shift in the approach to urban development by making cities compete through a nation-wide “Smart City Challenge”. Further, there is immense citizen participation in the preparation of Smart Cities’ proposals. Each selected city would get central assistance of Rs 100 crore per year for five years. The success in the mission has been phenomenal. In a period of 15 months, government has selected 60 Smart Cities, 20 cities have formed special purpose vehicles (SPVs) to implement the projects and a large number of projects have also hit the ground. Total investment of Rs 1,44,742 crore has been proposed by 60 selected Smart Cities.

Passengers waiting at a metro station. (Photographer: Sanjit Das/Bloomberg)
Passengers waiting at a metro station. (Photographer: Sanjit Das/Bloomberg)

Housing For All

The Housing for All mission aims to provide a house for every family living in urban area. The mission provides for housing through four streams – rehabilitation of slum dwellers with the participation of private developers using land as a resource, affordable housing through partnership with public and private sectors, promoting affordable housing for weaker section through credit linked subsidy, and provision of subsidy for beneficiary-led individual house construction or enhancement.

Another flagship programme launched by the government is the Swachh Bharat Mission which aims to make the urban areas open defecation free and focuses on conversion of insanitary toilets to pour flush toilets, eradication of manual scavenging, 100 percent collection and scientific processing/disposal reuse/recycle of municipal solid waste and bring about a behavioural change in people regarding healthy sanitation practices. All these programmes have components for capacity building of urban local bodies to enable them to efficiently implement the projects.

Residential properties in Gangtok, Sikkim. (Photographer: Prashanth Vishwanathan/Bloomberg)
Residential properties in Gangtok, Sikkim. (Photographer: Prashanth Vishwanathan/Bloomberg)

Bigger And Bolder Reforms Needed For The Next Phase Of Urbanisation

Time has come to recognise role of cities as independent and empowered governing units which are accountable to the citizens. The 74th Constitutional Amendment of 1992, which was a landmark legislation in decentralising governance, needs to be implemented in its true spirit. This would be in line with the spirit of cooperative and competitive federalism being pioneered by the Government of India.

Moving forward, bigger transformative reforms would be needed in the urban space. Major reforms would be required in areas of urban and spatial planning and revamping city design standards, audited balance sheets and resource generation via municipal bonds and private public partnerships, professionalising and strengthening of municipal cadres, transparent tracking of projects and service levels through city dash boards, wider citizen participation in city governance through ward and area committees and empowering political leadership at city level. States and city administrations must play a key role in undertaking these reforms.

(Amitabh Kant is the CEO of NITI Aayog (National Institution for Transforming India). Viraj Mehta is the head of India and South Asia of the World Economic Forum. Mehta is also a member of the executive committee of the WEF.)

This article has been produced in collaboration with the World Economic Forum and in line with the programme topics of the India Economic Summit under the theme “Fostering an Inclusive India through Digital Transformation.” For more information about the meeting visit http://wef.ch/ies16

The views expressed here are those of the author’s and do not necessarily represent the views of BloombergQuint or its editorial team.