Coping with urbanization

Coping with urbanization

India needs an investment of Rs39.2 trillion in infrastructure over the next 20 years as well as “major administrative reforms" to cope with the current rate of urbanization.

That’s the estimate of a high-powered expert committee (HPEC) on urban infrastructure led by economist Isher Judge Ahluwalia. Its report, submitted to urban development minister Kamal Nath on Monday, comes after a rating on sanitation in the Economic Survey this year showed that 190 out of 423 municipalities in India were on the brink of environmental disaster (coded red).

Also See | Coping With Urbanization (PDF)

The HPEC report is the result of two years of research into eight sectors of Indian infrastructure and services. It stresses the urgent need not only for more money to be spent on infrastructure projects, but also for a devolution of power and responsibility to local bodies, which should be held accountable by the people. “Its central message is that urbanization is not an option," said Ahluwalia in the preface to the report. “It is an inevitable outcome of the faster rates of growth to which the economy has now transited."

India’s urban population will reach a figure close to 600 million by 2031, more than double that in 2001, the report said. The suggested increase will raise investment in urban infrastructure from 0.7% of gross domestic product (GDP) in 2011-12 to 1.1% by 2031-32 and is timed to coincide with the beginning of the government’s 12th Five-Year Plan (2012-17).

The comprehensive study looks at improving services to the urban poor, managing migration and finding new ways of generating revenue for local projects with an emphasis on encouraging investment from the private sector.

Last week, finance minister Pranab Mukherjee allocated Rs12.14 trillion to be spent on infrastructure for 2011-12 in the annual budget, a 23.3% increase over the current fiscal year, and projected a Rs40.99 trillion investment for infrastructure development during the 12th Plan. But financing infrastructure projects is only half the battle. “Governance is the weakest and most crucial link which needs to be repaired to bring about the urban transformation so urgently needed in India," Ahluwalia wrote. “Financing the large sums required to meet the investment needs of urban infrastructure is crucially dependent on the reform of institutions and the capacity of those who run the institutions for service delivery and revenue generation."

Graphic by Sandeep Bhatnagar; photo by Pradeep Gaur/Mint