Issues associated with Urbanization in India
- Most urban finance originates with the government.
- The federal government provides 48%, the state government provides 24%, and local governments provide 15%.
- Commercial debt makes up 2% and projects involving public-private partnerships, 3% each.
Estimated demand reports for financing urban infrastructure:
- According to the Isher Judge Ahluwalia estimate, around ₹39.2 (thirty nine point two) lakh crore would be needed by 2030.
- The 11th Plan allots 1,29,337 crore for housing, 1,32,590 crore for urban transport, and 1,29,337 crore for four basic services.
- According to a McKinsey estimate, urbanisation will cost $2 trillion.
World Bank projections:
- Investment: Approximately ₹70 lakh crore, or over $840 billion, will be required to accommodate India’s expanding urban demand.
- Every year, $55 billion would be needed.
- Revenue: The cities provide 85% of the government’s total revenue.
- The government’s key initiatives, including as the Pradhan Mantri Awas Yojana (PMAY), the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), and the Smart City mission, do not exceed ₹2 lakh crore.
Solutions the report recommends:
- enhancing Indian cities’ creditworthiness and financial stability.
- Cities need to establish a stable revenue base and be able to pay for the services they provide.
- raising user fees, service fees, and property taxes, to mention a few.
The following recommendations were made by the national task committee led by K.C. Sivaramakrishnan that examined the 74th Constitutional Amendment:
- Giving People More Power
- Subjects being transferred to local governments
- 10% of the income tax revenue that cities receive ought to be returned to them.
- Make sure that the corpus fund is exclusively used for the construction of infrastructure.
The report’s fundamental issue is:
- Top to bottom method: A top to bottom method was used in the creation of the report.
- An excessive amount of emphasis is placed on technologically driven solutions that require expensive technologies.
The Way Ahead:
- By interacting with the populace and learning about their needs, plans must be formed from below.
- empowering the general public as well as local governments.
- The role of the three Fs: Finances, functions, and functionaries should all be transferred. Regular elections should be held in cities, and there should be empowerment.
- Urban water and sewerage administration at the state level may be gradually transferred.
- enhanced urban law system with a dependable and defined fiscal transfer system
- Give ULBs (urban local bodies) financial authority and the corresponding laws and regulations.
- It will establish the scope of investments in urban infrastructure throughout the medium to long term.
- The Shimla example: Between 2016 and 2017, the Shimla Water Works was consolidated into a single utility.
- In order to ensure a sufficient supply of water and proper distribution by the utility, but under the control of the Shimla Municipal Corporation, the Bank provided assistance in the form of a soft loan.
