Urbanization in India

September 22, 2011

  • While home to a minority of the population, Indian cities contribute to about 2/3 of the economic output.
  • The population of Indian towns and cities are expected to increase from 282 million to 590 million in the next 20 years.
  • Already, slums now account for about 26% of all urban population in cities. In Mumbai, more than half the population lives in slums.

Urbanization is not a side effect of economic growth; it is an integral part of the process. As in most countries, India's urban areas make a major contribution to the country's economy. Indian cities contribute to about 2/3 of the economic output, host a growing share of the population and are the main recipients of FDI and the originators of innovation and technology and over the next two decades are projected to have an increase of population from 282 million to 590 million people. India's towns and cities have expanded rapidly as increasing numbers migrate to towns and cities in search of economic opportunity.

Hence accompanying India's rapid economic growth will be a fundamental shift in terms of a massive urban transformation, possibly the largest national urban transformation of the 21st century. This would pose unprecedented challenges to India's growing cities and towns in providing housing and infrastructure (water, sewerage, transportation, etc.), and addressing slums. Already, slums now account for about 26% of all urban population in cities. In Mumbai, more than half the population lives in slums, many of which are situated near employment centers in the heart of town, unlike in most other cities in developing countries. This would also entail massive capital investment needs in urban infrastructure India, as highlighted by various Finance Commissions and expert bodies. For instance the Report on Indian Urban Infrastructure and Services by the High Powered Expert Committee (HPEC) on urban projects an investment requirement of over US$ 870 billion over the next 20 year period. Similarly a Mckinsey study on Indian urbanization projects an investment need of US$ 1.2 trillion over a similar period.

Meeting the needs of India's soaring urban populations is and will continue to be a strategic policy matter for various national, state and city governments. Promoting an efficient urbanization process in India will require a set of policies that will deal with land policies and basic needs, connective infrastructure and specific interventions. India also needs well managed cities with high quality services. Water supply and sanitation, urban transport and urban drainage are key local services to ensure the quality of living and sustained growth. Sustained energy supply, and affordable serviced land are services that are essential for the development of the economy.

Urban Challenges

The built environment: the supply of both land and infrastructure is falling behind demand.

• Out of date and static master plans immobilize the supply of serviced land and buildable space, blocking efficient and productive development. While important laws have been revoked to remove land restrictions and rent controls, many of the legal instruments to operationalize those reforms are still lacking;
• Inappropriate FSI, zoning and development control regulations inhibit development and trunk infrastructure;
• Fractured planning structures are incapable of integrated planning for land use, infrastructure planning, and finance across metropolitan areas;
• The legal, regulatory and institutional basis for land management is generally lacking, hindering the capacity of the private sector to be competitive and the ability of the public sector to use land based financial instruments to finance infrastructure investments.
• Urban services, including water & wastewater, and solid waste, do not reach many residents, and those they do serve receive sporadic, unreliable services. And, in the case of non-notified slums, service providers are prohibited from serving residents.
• Public transport services provide inadequate services, and non-motorized transit for pedestrians, bicycles, and handcarts is limited, forcing this traffic to compete with cars, trucks and motorcycles for space on the streets.
• The proliferation of slums is largely the result of failures in land markets and regulations, compounded by limited access to housing finance.
• Rigid master plans and restrictive zoning regulations limit the land available for building, constricting cities' abilities to grow in accordance with changing needs.

Weak and unpredictable financing frameworks limit the ability of ULBs to manage their resources effectively.

• Overlapping institutions across three tiers of government diffuse accountability across agencies, parastatal bodies and elected governments. This situation undermines India's robust democracy, clouds issues of responsibility, and blocks the development of coherent regulatory frameworks and sustainable service delivery models.
• Dominance of state governments: India's states are often on the scale of countries. These state governments cannot effectively provide service or good governance at the local level. Even India's mega-cities do not have control over their own policies, planning, finances, assets, or institutions.
• ULBs and local service entities have neither clear responsibility nor the fiscal and operational autonomy to deliver adequate urban services;
• Weakness of local governments: ULBs lack capacity, i.e. systems and trained human resources in areas such as financial and organizational management; land use and infrastructure planning; asset management; and project identification, design and management.
• This leaves them trapped in a low level equilibrium, dependent on the State and Centre. Citizens have limited opportunities to hold City managers (who are appointed by the states and are not elected) and service providers accountable for the quantity or quality of services provided..

Government Priorities and Programs:

Government's urban development strategy. There two urban related ministries at the national (GoI) level- the Ministry of Urban Development (MoUD) and Ministry of Housing and Urban Poverty Alleviation (MoHUPA). The Government of India's overarching urbandevelopment objectives is to create economically productive, efficient, inclusive and responsive ULBs, by focusing on strategic outcomes: (i) universal access to a minimum level of services; (ii) establishment of city wide frameworks for planning and governance; (iii) modern and transparent budgeting, accounting and FM; (iv) financial sustainability for ULBs and service delivery institutions; (v) utilization of e-governance; (vi) transparency and accountability in urban service delivery and management; (vii) Slum-free cities.

In pursuance of these goals, the Government of India (GoI) launched a flagship urban development program called the Jawaharlal Nehru National Urban Renewal Mission (JnNURM), in December 2005. The Mission targets 65 ULBs (7 with populations greater than 4 million, 28 greater than 1 million and 30 other ULBs of religious, historic or tourist importance). JnNURM is reform and incentive based - in return for a commitment to adopt the obligatory reforms over a period of seven years, ULBs may access funds for investment and capacity building. The investment component of the Mission consists of two sub-missions: (i) Urban Infrastructure and Governance (UIG), implemented by the Ministry of Urban Development (MoUD), with investments including (a) water, sanitation, sewerage and drainage; (b) solid waste management (SWM); (c) urban transport; (d) street lighting; and (e) environmental protection; and (ii) Basic Services to the Urban Poor (BSUP), implemented by the Ministry of Housing and Urban Poverty Alleviation (MoHUPA), with investments supporting integrated development of slums. More recently GoI launched the Slum-free City program of Rajiv Awas Yojana (RAY) a scheme working towards the goal of a slum-free India.

In addition, many of the state governments have their own urban development schemes and programs at the state and level, focusing on many of the aforesaid issues.