Indian Cities Can Take More Advantage of Urbanization for Economic Growth

September 24, 2015

NEW DELHI, September 24, 2015 – Although they have made progress, India and other South Asian countries can make better utilization of opportunities that urbanization provides them to transform their economies to join the ranks of richer nations, a World Bank report released today said.

Difficulty in dealing with the pressures that increased urban populations put on infrastructure, basic services, land, housing and the environment have fostered what the report calls “messy and hidden” urbanization.  This, in turn, has helped to constrain the region’s full realization of the prosperity and livability benefits of urbanization.

Messy urbanization in India is reflected in the nearly 65.5 million Indians who, according to the country’s 2011 Census, live in urban slums, as well as the 13.7 percent of the urban population that lived below the national poverty line in 2011. Messy urbanization is also reflected in the increasing sprawl that afflicts many Indian cities. Hidden urbanization is seen in the large share of India’s population that lives in settlements that possess urban characteristics but do not satisfy the criteria required to be officially classified as urban.

“If managed well urbanization can lead to sustainable growth by increasing productivity, allowing innovation and new ideas to emerge,” said World Bank Managing Director and Chief Operating Officer Sri Mulyani Indrawati.

“Better cities can help reduce poverty, improve living conditions and create the environment for more and better paying jobs,” she added in releasing the report titled Leveraging Urbanization in South Asia: Managing Spatial Transformation for Prosperity and Livability.

Annette Dixon, Vice President for the South Asia Region of the World Bank, said policymakers in the region face a choice: Continue with the same policies or undertake reforms to tap into the unrealized potential of South Asia’s cities, where the urban population increased by 130 million from 2000 to 2011 and is poised to grow by almost 250 million in the next 15 years.

“It is essential to move forward,” Dixon said. “It won’t be easy, but with the right policies and investments, South Asia’s cities can be much more livable and prosperous.”

Since 2000, the report found, South Asia has made good strides in achieving greater prosperity with the increase in productivity linked with the growing number of people living in the region’s towns and cities. Still, South Asia’s share of the global economy remains strikingly low relative to its share of the world’s urban population.

The share of the region’s population officially classified as living in urban settlements increased only marginally from 27.4 percent in 2000 to 30.9 percent in 2011, an annual growth rate of 1.1 percent. In India, the pace of urbanization was just over 1.15 percent a year from 2001-2011.

Analyzing the patterns of India’s urbanization, the report said while India added seven multicity agglomerations [Multicity agglomerations are defined as a continuously lit belt of urbanization containing two or more cities, each of which had a population of at least 100,000 living within its administrative boundaries in 2010.] between 1999 and 2010 for a total of 30, Indian cities are not able to take full advantage of these agglomerations. The largest metropolitan centers (Mumbai, Delhi, Bangalore, Kolkata, Chennai, Hyderabad, and Ahmedabad) saw a 16 percent loss in manufacturing jobs between 1998 and 2005 within 10 km of their city centers. On the other hand, job growth in their immediate peripheries increased by almost 12 percent.

Even population growth has been fastest on the peripheries (beyond official administrative boundaries) of these major cities. For example, population growth for the district of Delhi was 1.9 percent a year between 2001 and 2011, while the population growth in Gautam Budh Nagar (its eastern periphery) was 4.1 percent a year. 

For many major Indian agglomerations, rapid growth in peripheral areas has been accompanied by evidence of stagnation at their core, where land management policies are limiting the extent and intensity at which land can be used by industry, commerce and housing, the report said. The economic push away from city cores is also imposing a burden on businesses and people by elevating market connection costs for firms and commuting costs for workers with negative consequences for productivity, welfare, mobility, and livability in the major cities.

It is very encouraging that programs like Smart Cities and AMRUT are incorporating many of the ideas outlined in this report,” said Onno Ruhl, World Bank Country Director for India. “The challenge will be to make this transition inclusive, providing opportunities and jobs to youth, especially women, and supported by efficient service infrastructure” he added.

Policy Actions

To better tap into the economic potential that urbanization offers, policymakers in India and throughout South Asia should consider actions at two levels – the institutional level and the policy level.  At the institutional level, the region would benefit from improvements in the ways in which towns and cities are governed and financed.  Specifically, the report said that reform is required to address three fundamental deficits – in empowerment, resources and accountability:

  • Intergovernmental fiscal relations must be improved to address empowerment.
  • Practical ways must be identified to increase the resources available to local governments to allow them to perform their mandated functions.
  • Mechanisms must be strengthened to hold local governments accountable for their actions.

Whilst a necessary pre-condition for meaningful progress, however, these reforms by themselves will not, according to the report, suffice.  To tackle messy urbanization and bring about lasting improvements in both prosperity and livability, policies are also required to improve the ways in which cities are connected and planned, the working of land and housing markets, and cities’ resilience to natural disasters and the effects of climate change. For instance, India’s Golden Quadrilateral Highway and Ahmedabad city’s Bus Rapid Transit System (BRTS) are examples of good connectivity and planning. What is required is not a one-size fits all planning, but small-scale, neighborhood-level urban planning like in Bhendi Bazaar, Mumbai, the report added. 

Media Contacts
Nandita Roy
Tel : +91-11-41479220