Syllabus
GS Paper 1 – Role of women and women’s organization, population and associated issues, poverty and developmental issues, urbanization, their problems and their remedies.
Context
With the urban population set to rise exponentially, urban India’s future depends on the ability to address the key financial and structural challenges.
Source
The Hindu| Editorial dated 25th November 2024
India’s urban infrastructure financing, needs and reality
India’s urban population is expected to double, reaching 800 million by 2050. This rapid urbanization presents both opportunities and challenges, especially in addressing the estimated ₹70 lakh crore urban infrastructure investment requirement by 2036. The current annual investment of ₹1.3 lakh crore highlights a significant financial gap that must be addressed for sustainable urban development.
Challenges in Urban Infrastructure
Municipal Finances and Revenue Gaps
- Municipal finance has remained stagnant at 1% of GDP since 2002.
- Municipal bodies contribute 45% of urban investments but struggle with declining self-sufficiency, with own revenue sources dropping from 51% to 43%.
- Property tax collection is only ₹25,000 crore, or 0.15% of GDP, due to collection inefficiencies.
Low Absorptive Capacity
- 23% of municipal revenue remains unspent, indicating inefficiencies in fund utilization.
- Cities like Hyderabad and Chennai spent only 50% of their capital budgets in 2018-19.
- National schemes like AMRUT and Smart Cities Mission achieved 80% and 70% fund utilization, respectively.
Decline in Public-Private Partnerships (PPPs)
- PPP investments peaked at ₹8,353 crore in 2012 but declined to ₹467 crore by 2018.
- Lack of project-specific revenue streams reduces the financial viability of PPP projects.
Proposed Reforms and Strategies
Long-Term Structural Reforms
- Strengthen State Finance Commissions to empower municipal bodies with greater financial and administrative autonomy.
- Encourage municipal bodies to explore debt financing and issue municipal bonds to attract private capital.
Develop a Robust Project Pipeline
- Follow the High-Powered Expert Committee’s framework for ₹70 lakh crore investment by 2036.
- Prepare 600-800 projects annually to secure 250-300 viable PPP projects.
Decouple Project Preparation from Financial Assistance
- Prioritize detailed project planning for financial, social, and environmental sustainability.
- Address India’s climate vulnerability through resilience-focused designs.
Leverage Digital Public Infrastructure (DPI)
- Modernize urban service delivery, especially in public transport, using DPI.
- Improve operational efficiency and enhance service accessibility through digital solutions.
Capture Land Value in Transport Projects
- Integrate metro and rail projects with urban development to harness land value.
- Design transit hubs that create jobs and contribute to urban economic efficiency.
Other Key Reforms
Climate Resilience in Urban Infrastructure
- Incorporate climate-resilient designs in urban planning.
- Invest in green buildings, energy-efficient transport systems, and urban forests.
- Align projects with India’s National Action Plan on Climate Change (NAPCC) and SDG targets.
Social Equity in Urban Development
- Focus on affordable housing and equitable access to water and sanitation services.
- Include community participation in planning to reflect local needs.
- Develop policies addressing informal settlements and urban poverty.
Strengthening Governance and Accountability
- Introduce performance-based funding for municipal bodies.
- Leverage Geographic Information Systems (GIS) for better urban planning and transparency.
- Institutionalize periodic audits and establish grievance redressal mechanisms.
Integration of Transport and Mobility Solutions
- Develop seamless, multimodal transport systems to reduce congestion.
- Prioritize non-motorized transport like cycling and walking tracks.
- Promote EV charging networks and shared mobility solutions.
Capacity Building and Skill Development
- Invest in training for urban planners, municipal staff, and engineers.
- Partner with academic institutions for urban policy research.
- Promote smart city management and climate-responsive design skill-building programs.
Conclusion
India’s urban transformation depends on bridging the financial and structural gaps with immediate and long-term strategies. Collaboration among government tiers, private sector participation, and a focus on innovation will ensure sustainable urban growth, improving the quality of life for citizens. The time to act is now to secure a resilient urban future.
Related PYQ
‘The states in India seem reluctant to empower urban local bodies both functionally as well as financially.’’ Comment? [ UPSC Civil Services Exam – Mains 2023]
Practice Question
India’s urbanization presents significant opportunities but is hindered by major financial and structural challenges. Discuss the key issues in urban infrastructure development and suggest measures to address them. [250 words]
Guidelines for Answering the Question
- Introduction:
- Briefly introduce India’s urbanization trajectory and its associated challenges.
- Mention the projected population growth and the critical importance of addressing infrastructure needs.
- Body:
- Highlight municipal financial limitations and stagnant revenues.
- Address inefficiencies in fund utilization and low absorptive capacity.
- Discuss declining PPP investments and gaps in project preparation.
- Explain implications on sustainable development, urban transport, and basic services.
- Highlight social, economic, and environmental costs of inaction.
- Conclusion:
- Summarize the need for collaboration across stakeholders, innovation, and effective governance.
- Emphasize urban infrastructure as key to India’s sustainable and inclusive development trajectory.