A reminder of the flaws in India’s urbanisation policies

Source– The post is based on the article “A reminder of the flaws in India’s urbanisation policies” published in The Hindu on 23rd January 2023.

Syllabus: GS2- Urbanisation, their problems and their remedies

Relevance– Issues related to urban finance and urban governance

News– The article explains the scenario of urban finance in India. It provides solutions to problem faced by urban governance in India

What is the scenario of urban finance in India?

Urban finance predominantly comes from the government. 48%, 24% and 15% of urban capital expenditure needs are derived from the central, State, and city governments, respectively. Public–private partnership projects contribute 3% and commercial debt 2%.

Various reports have estimated a huge demand for funding urban infrastructure. The Isher Judge Ahluwalia report says that by 2030, nearly ₹39.2 lakh crore would be required. A McKinsey report on urbanisation has a figure of $1.2 trillion, or ₹90 lakh crore.

What are some points contained in the World Bank report on urbanisation in India?

It estimates that nearly ₹70 lakh crore would be needed for investment in urban India to meet the growing demands of the population.

It suggests improving the fiscal base and creditworthiness of the Indian cities. Cities must institute a buoyant revenue base. They must be able to recover the cost of providing its services.

This report points out that nearly 85% of government revenue is from the cities.

Its emphasis is on the levying of more burdens in the form of user charges on utilities, etc.

It focuses on private investments

State-level management of urban water and sewerage functions may be devolved in a time-bound manner.

An improved urban legal framework that includes a stable and certain fiscal transfer regime, accords financial powers to ULBs will determine the future of cities.

What are issues with urbanisation in India?

The basic problem with the reports on urbanisation in India is that they are made using a top to bottom approach. They have too much of a focus on technocentric solutions using very high capital-intensive technologies.

Cities primarily are run by parastatals.The city governments hardly have any role to play in the smooth functioning of such parastatals.

What is the way forward for improving the situation of the Indian urban ecosystem?

Plans must be made from below by engaging with the people and identifying their needs.

Empowering the city governments and the people at large is the need of the day.

The national task force to review the 74th Constitutional Amendment by K.C. Sivaramakrishnan provides many suggestions. It asks for empowering the people, transferring subjects to the city governments.

It suggests that 10% of the income-tax collected from cities be given back to them and ensuring that this corpus fund was utilised only for infrastructure building.

There is a need to improve urban governance. Regular elections should be held in cities and there must be empowerment through the transferring of the three Fs: finances, functions, and functionaries.

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