Economic growth in India is currently robust at an expected 7.2% for the year 2024-25. Nominal GDP is slated to grow to Rs 324 lakh crores indicating a growth of 11%. Inflation is projected to stay at 4.5%. If India needs to sustain a real growth rate of 8-9% in the decade to follow, our investment to GDP ratio must be at 40%. Investment in urbanization is a part of the growth requirement. From 0.6% of GDP current investment in urban infrastructure, we need to go up to 1.2% of GDP investment in 15 years to manage reasonably our urban areas.
If we look at the overall urbanization rate in India, we have gone down from 31.5% in 2011-12 to 29.2% in 2022-23. The 2011-12 figures are from the census while the 2022-23 figures are from Periodic Labor Force Survey (PLFS).
Covid Left a Huge New deficit!
Why did we see this kind of a decline in urbanization? During Covid, several labourers from the urban areas went back to the rural areas, taking up employment in agriculture and serving as unpaid labour in the household sector and only a small part of them returned to urban centres to take up the same employment or alternate ones. Therefore, the share of employment in agriculture between 2011-12 and 2022-23 was static at about 46%, instead decreasing due to urbanisation, while the employment share in industry in services showed only a marginal improvement.
As agriculture contributes only 18% of GDP but 46% of employment, there is a need to shift away people from agriculture to non-agricultural activities in rural areas and in semi urban areas. For the industry and services sector to grow, it is necessary to establish secondary and tertiary activities and urbanization plays a crucial role in achieving this.
By an estimate, urban population contributes 63% to the GDP and it is hoped that by 2030 this contribution will go up to 75%. This indicates that the route to sustainable development in India cannot overlook the need for rapid and sustainable urbanisation.
Urbanization has interlinkages with increasing incomes at all levels. Also, at bottom 30% of consumption cohort. As their consumption grows, the extent of industrialization and urbanization also increases. It is therefore essential that policymakers focus on how the household sector can increase its viability and sustainability.
Post covid, many of the household enterprises disappeared thanks to destruction of their capital. If such enterprises are allowed to be reborn, the financial system in the country should be guided to replenish the lost capital with appropriate approach to collateralization. Why this is important is that many of the household enterprises are in the urban areas and this step will add to the vitality of the urban sector.
Economic Development Must Make its Impact Felt
Economic development sans employment growth is meaningless. Though estimates of unemployment vary with the way they are computed, it is clear that there is significant youth unemployment. For those in the age group of 15-29, unemployment is beyond 20%. Our current LFPR is around 40% while for women it is around 28%. Unless we move to 45% in LFPR terms for men and women, labour for growth will be deficient. For this to happen, our secondary and tertiary sectors must grow in an accelerated fashion, so that we can become a middle-income country by 2040. Development in urbanisation is necessary to achieving this status.
Creating liveable cities/towns with conditions for equitous living with amplitude for meeting future challenges are basic ingredients of sustainable urbanisation.
Financing is important for infrastructure development component of urbanisation. At present, 72% of funds for urban development is from the public sector and 5% from commercial sources. How to get commercial financing to bridge the shortfall in urban infrastructure funding is a challenge to public policy makers. Some actions have taken place in this regard. But a lot more needs to be done. Predictability and stability in policies is essential to fill this gap in funding. With bond inclusion in indices, there is one more avenue open to us.
15th FC has provided a challenge fund of Rs. 38,196 crores over the 5-year award period for 50 million+ cities. 1/3rd of this funding is for achieving ambient air quality while the remaining is for meeting service level benchmarks on drinking water supply, rainwater harvesting, solid waste management, etc. A grant of Rs. 82,859 crores has been recommended for cities with less than a million population for drinking water, rainwater harvesting and sanitation.
For equitous and liveable cities, focus on human resources is critical. Providing healthcare and skill development for urban areas requires private participation, as in other areas of urbanisation management as well. Urban planning is an area where lack of skilled human resources is becoming a nightmare. Where urban public transportation is efficient, secondary and tertiary activities are witnessing reduction in input costs. Integrated urban transportation in a multi-modal form will increase participation of labour in secondary and tertiary sectors in urban agglomeration.
Chennai is showing the way in this regard. Treating sullage water for industrial use has become an accepted idea. Integrating water supply and sewerage system with recycling relieves the stress in some water deficient urban areas. Managing urban flooding and regeneration of urban water bodies is complex in implementation, but if we plan them appropriately, they will relieve the urban populace of their woes extensively.
Underpinning all these is the need for proper urban planning. Lack of it leads to urbanisation getting unacknowledged and unaddressed, to borrow a phrase from Niti Aayog. Urban local bodies must be allowed to play their role in planning for orderly urbanisation, a role which has been granted to them constitutionally. If additional legal powers are necessary to be given to them, we must not hesitate.
Problems in Planning Urban Infrastructure
The problems urban planning will face in the future are many.
Climate change will have a bearing on how we develop our urban areas in future. Taking conscious decisions on managing urban heat island effect , flooding or lack of adequate water supply, greening of urban areas, maintenance or regeneration of urban water bodies, prevention of desertification, generation of space for mass urban transportation, to mention a few, are critical to ease of living when we are going to face the unsavoury effects of climate change. As a result, changes will need to be made in urban planning. Scientific temper must be imbibed by planners, administrators, policy makers and political executive in meeting this challenge. The public, who would bear the brunt of the effects of climate change, must be taken into confidence while taking appropriate steps to meet the challenge.
With use of improved technologies, planning zones and granting approvals for appropriate construction in seismic hazard zones III and IV are now feasible. Urban planners must not lose sight of this.
The concept of property right is age old. Moving away from old models of survey to use of GIS and GPS to give unique number to holdings will help resolving many problems. Use of new technologies may, however, need change in the extent of holdings against what is already recognised in the records. This requires sensitive handling; not seen so much in the administrative culture we have today.
Gujarat as a Case Study: Good Progress in Urbanization
As far as Gujarat’s urbanisation and its management is concerned, Gujarat is an advanced state with primary sector contributing 20.1%, secondary sector 44.2%, and tertiary sector 35.7% to its GSDP. Gujarat is essentially a secondary sector driven economy. This has been one of the major reasons for its growth in urbanization. Its decadal growth rate of primary sector is 4.3%, secondary 8.9% (manufacturing at 9.8%) and tertiary 7.3%. Per capita growth rate of GSDP is 6.8% and population has grown at 1.4%.
Currently Gujarat’s urbanization levels stand at 39.4% from about 43.1% in 2011-12. Its distribution of urban population is skewed due to increased regional disparity in the levels of urbanization. Its class I cities have 71% of total urban population. 53% of the entire urban population comes from Ahmedabad, Surat, Vadodara and Rajkot. However, recent patterns indicate that urban population is spreading towards Saurashtra, thanks to industrial and infrastructure projects. Small and medium towns in class IV, V and VI are spatially spread out. The census towns have exhibited increase in urban population both in terms of growth and numbers. The census towns are in any case well connected to large urban and industrial centres. Their connectivity extends to good rail, road and port infrastructure, increasing further urbanization.
The port towns have also spawned growth of secondary sector leading to further urbanization. A fair share of urbanization in Gujarat is contributed by migration from other states of the country. According to a source, Gujarat was expected to cross 53% of urbanization levels by 2026, though the current trends of urbanization do not indicate that this is going to be feasible. Gujarat has been a pioneer in appropriate planning of its urban centres.
Gujarat has been at the forefront of an unconventional methodology in garnering resources to execute planned urbanization. Ahmedabad is the 1st city in the country to have gone in for municipal bonds. Its success has shown the way for others.
Gujarat is also famous for land pooling methodology for obtaining lands for planned development and common purposes. Based on this, Town Planning Schemes (TPS) have been prepared for implementation. Several urban development authorities (UDA) in the state ensure planning and implementation of TPSs. Most importantly TPSs have helped overcome many barriers authorities face for obtaining lands for common infrastructure and this has helped in avoiding haphazard development. By the nature of the process followed, TPSs have created many winners and of course some losers. A clear cynosure in Gujarat is Sabarmati River front development. This is a shining example where multiple objectives in urban planning and development have been fused on a single project.
We also need to focus on some broader institutional issues in urban planning and development. I also know that urban planning and municipal authorities operate in separate compartments, each not factoring in the others’ requirements and capabilities. Is there a way this can be resolved? Again, we observe that the UDAs are generally bureaucracy driven, probably taking instructions from superiors. Will the public be benefitted if UDAs’ decision making involves some elected representatives, which can surely balance ground level situation and the needs of scientific planning? Whatever may be the answers to these issues, all of us must follow complete transparency in urban planning and its implementation. This will help in achieving frictionless outcomes.
Some thoughts on sustainable urban development. There are always trade offs in sustainable development. If urban agglomeration extends to peri urban areas, there is trade off among poverty alleviation, economic development and urbanisation. Environmental impact on peri urban areas, their feeding urban areas with fresh food and supply of labour from peri urban areas to urban areas have a trade-off. While metrices may be developed in such cases, we must always show sensitivity to the livelihood of the poor.
This presentation was made recently at the meeting of ITPI, Western Zone, in Ahmedabad in the presence of senior leaders including the Chief Minister of Gujarat, Keshav Verma.
ABOUT THE AUTHOR
R. Gopalan served as a member of the Public Enterprises Selection Board (PESB) under the Prime Minister’s authority. Prior to retirement, Gopalan was Secretary in the Department of Economic Affairs, Ministry of Finance, Government of India.
