(November 22, 2010)
Urban India: Recent Trends and Initiatives1
Chetan Vaidya and Debolina Kundu2
Introduction
This paper section briefly describes recent urban trends and initiatives in India and provides
a way forward.
In 2001, India had the second largest urban population in the world at 286 million;
however, urbanization was only around 30%, much lesser than similarly growing countries
across the world. The Constitution (74th Amendment) Act (CAA) came into force in June,
1993 which sought to strengthen urban governance and management of services. Urban
India today contributes to 58 percent of India’s GDP. By 2030, urbanisation is expected to
touch around 40 percent and urban India is expected to contribute to around 70 percent of
the country’s GDP. India must improve urban sector productivity to achieve objectives of
national economic development. This translates into a need for better service provision and
governance, and bring the urban informal sector into the mainstream of development
process, both which today are far from satisfactory. The Jawaharlal Nehru National Urban
Renewal Mission (JNNURM), Service Level Benchmarking, National Urban Sanitation
Policy, setting up of a High Powered Expert Committee on Urban Infrastructure, Centers of
Excellence in Urban Development, Urban Transport Policy, Public-Private-Partnership,
etc., are some of the initiatives undertaken by the Government to address this. In June
2009, the President announced that Indian cities will become slum-free by 2015 and a huge
challenge lies in front of us to achieve this vision. Another important development was the
importance accrued by the 13th Central Finance Commission (CFC) to Urban Local Bodies
(ULBs). The recently launched McKinsey Global Institute (MGI) Report on Urban Report
also highlights similar concerns noting the substantive infrastructure investment required to
take India to the next level of economic growth. There is a strong realization to improve the
urban India to achieve fast and sustained economic development.
JNNURM
Launched in 2005, JNNURM incentivized reforms in urban governance, service delivery,
financial management and devolution of functions to ULBs, and linked achievement of
these to performance-conditional grants for infrastructure investments in 65 cities across
India. JNNURM has brought national focus on the urban sector, increased capital
investments in service provision, created a catalytic environment for reforms, and enabled
ULBs to usher in innovations. JNNURM has seen a mixed response across the states both
on reforms and projects, Tamil Nadu, Andhra Pradesh, Maharashtra and Gujarat have
performed better than others, while states in North-East, J&K, and Uttrakhand have not
done well. Efforts of Madhya Pradesh and Orissa are noteworthy as they have taken special
efforts to improve capacities to implement both projects and reforms. Key challenges being
The Paper published as part of papers for “Workshop on Transforming Cities” organized by the Lucknow
Management Association, December 2010.
2
Prof. Vaidya is Director and Dr Kundu is Associate Professor at the National Institute of Urban Affairs
(NIUA), New Delhi.
1
faced by the Mission include lack of capacity to prepare project documents, raise revenues,
implementation of large projects and reforms.
13th CFC
Importantly, the report of 13th CFC released in February 2010 recommended general
performance grants and special area performance grants to be linked to performance of
ULBs. Moreover, allocations to ULBs would now be linked to divisible pool replacing the
previous ad-hoc allocation. It has recommended grants of Rs. 23,111 crores to ULBs
during 2010-15, a four-fold growth over the 12th CFC allocation. The 13th CFC
recommends state governments and ULBs to focus on improved property tax revenues,
urban service standards, strengthened local body framework, improved municipal
accounting, introduce system of independent ombudsmen, and put in place a system of
electronic transfer of grants to ULBs among other things.
Recent Initiatives in the Urban Sector
Over the last few years, MOUD has undertaken a number of innovative initiatives to
strengthen service delivery and governance in ULBs and key initiatives are indicated
below.
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Service Level Benchmarking: In order to make available data on a standardised
framework for performance monitoring of basic urban services, MOUD has brought out
a Handbook of Service Level Benchmarks. It has also launched the Service Level
Benchmarking Pilot project in February 2009 with the objective of collation of
performance data, preparation of Improvement Plan, and implementation of
Performance Improvement Plans.
National Urban Sanitation Policy (NUSP): It lays vision for urban sanitation in India
and aims to facilitate formulation and implementation of state sanitation strategies and
city sanitation plans; benchmark level of services, and rating of about 400 ULBs. Over
120 ULBs are preparing City Sanitation Plans as part of NUSP.
Promoting Public Private Partnership (PPP): MOUD is actively promoting PPPs in the
urban key infrastructure sector. Notable PPPs in urban service delivery include the
24x7 water supply scheme (Hubli-Dharwad, Karnataka), water efficiency and reduction
of non-revenue water (Chandigarh), mass rapid transit system (Mumbai), city bus
transport (Indore, Rajkot, Vadodara), solid waste treatment (Mumbai, Bangalore), etc.
 Urban Infrastructure Development Scheme for Satellite Towns around Mega Cities:
MOUD has initiated this scheme of for Satellite Towns around 7 Mega Cities’. As part
of this, 7 cities were selected, namely Sonepat and Pilakhua (near Delhi), Vasai Virar
(near Mumbai), Rajarhat (near Kolkata), Sriperumbudur (near Chennai), Hosekutu
(near Bengaluru), Vikarabad (near Hyderabad) and Sanand (near Ahmedabad). The
objectives of the scheme are: Develop urban infrastructure facilities at satellite towns;
Enhance sustainability of urban infrastructure facilities by implementing reforms; and
Adopt innovative PPP models for development of the towns.
 Pooled Finance Bonds: The Government of India is supporting tax-free municipal bonds
to finance urban infrastructure. The Water and Sanitation Pooled Fund, Tamil Nadu
issued tax-free bonds under Pooled Finance Development Fund on September 2010.
The issue was of Rs. 83.19 crore at 7.5% annual interest for 10 year period. The project
would cover sewerage schemes in 6 towns, viz. Virudhunagar, Ambattur, Pallavaram,
Kancheepuram, Ramanathapuram, Namakkal and a water supply scheme in Salem
Municipal Corporation (in addition to the six). Total cost of the project is Rs.187.53
crores. These schemes would cover a total population of 15.78 lacs in 2001).
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Centers of Excellence on Urban Development: MOUD is supporting 13 Centers of
Excellence in reputed academic and research organizations across the country with the
aim to strengthen capacity building measures, promote awareness, research and training
in priority areas.
High Powered Expert Committee (HPEC)
India has witnessed unbridled urbanization in recent past. The fast pace of urbanization, in
absolute terms, has imposed increasing pressure on the level of existing services in the
urban centers. Consequently, the positive role of urbanization has been over-shadowed by
deterioration in the quality of built environment and quality of life. In this regard, MOUD
constituted a HPEC in May 2008 for estimating the investment requirements for urban
infrastructure services in addition to establishing the physical and financial norms; suggest
financing options, reforms and institutional changes necessary to ensure flow of investment
into urban infrastructure services sector.
Housing the Urban Poor
GOI has introduced the Rajiv Awas Yojona (RAY) towards fulfilling its vision of slumfree cities. The scheme for affordable housing through partnership and the scheme for
interest subsidy for urban housing would be dovetailed into RAY which would extend
support under JNNURM to states that are willing to assign property rights to people living
in slum areas. During the current financial year, Rs.1,270 crore have been allocated for
RAY. In addition to providing subsidized credit, it would provide basic amenities such as
water supply, sewerage, drainage, internal and approach roads, street lighting and social
infrastructure facilities in slums and low-income settlements adopting a 'whole city'
approach.
Report on India’s Urban Awakening
MGI published it’s 'India’s Urban Awakening – Building Inclusive Cities, Sustaining
Economic Growth' recently. The study estimates India’s urban population is likely to
increase from 340 million in 2008 to 590 million by 2030 (40% of total population). Five
large states, namely, Tamil Nadu, Gujarat, Maharashtra, Karnataka and Punjab will have
more than half of their population living in urban areas. Urban India will be critical for both
sustainable and inclusive economic growth of the country. It has projected that urban India
would need infrastructure investments to the tune of US$ 2.2 trillion (around Rs.10,300
crore) over the next 20 years; another US$ 1 trillion will be required for effective operations
and maintenance. This translates to almost eight times the level of present per capita
expenditure and two percent of GDP annually.
The study makes concrete suggestions in five areas of: funding; governance; planning;
sector policies; and shape. It has suggested four sources of funding urban infrastructure,
namely, monetizing land assets, collecting higher property taxes and user charges, debt and
PPP and formula-based government spending. It builds a strong case on the need to
empower urban administration and modernization of service delivery structures. It also
identifies the need for overhauling of metropolitan and municipal planning systems and
capacities. Suggestions on sector policies include affordable housing for low-income
groups and environment sustainability. Finally, it suggests focused approaches to different
tiers of cities and fostering inter-city connectivity. It is needless to add that these reforms
will need political will, vocal citizens and active participation of the private sector.
National Mission on Sustainable Habitat
One of the eight Missions as part of the Prime Minister action plan for climate change, is
on the National Mission on Sustainable Habitat was assigned to this Ministry. MOUD
formulated the Mission document through several round of consultations and discussions.
The document was finally approved by the Prime Minister’s Council on Climate Change in
June 2010. The objective of the Mission is to promote sustainability of habitats through
improvements in energy efficiency in buildings, urban planning, improved management of
solid and liquid waste including recycling and power generation, modal shift towards
public transport and conservation. It also seeks to improve ability of habitats to adapt to
climate change by improving resilience of infrastructure, community based disaster
management and measures for improving advance warning systems for extreme weather
events.
Way Forward
Despite the strong focus on urban reforms, many ULBs are yet to develop themselves as
autonomous city management agencies to dovetail urbanization with economic
development. There is also need to improve financial sustainability of ULBs by improved
property tax administration, appropriate user charges, use of land as a resource, eGovernance. These reforms will help ULBs to access market-based finance and introduce
intr and PPPs in towards improving service delivery. It must be recognized that along with
additional funds, there is need to improve soft infrastructure in urban sector like technical
assistance, capacity building, centers of excellence, e-Governance, peer learning, etc. Also
assigning property rights to the slum dwellers would aid in ensuring inclusive urban
development. Climate change issues need to be dealt with in urban areas. Urban
institutional reform will be another area that will require significant additional attention in
the years to come. Thus urban management has to play an important role in improving our
cities in the country.