Managing India’s urbanisation

As per census 2011, 377 million Indians comprising 31.14 per cent of total population are living in urban areas. As per UN Habitat’s World Cities Report, 2016, urban population in India reached 420 million in 2015 and urbanization level about 33%. Urban areas in India already contribute over 60 per cent of the GDP of the country.

Urbanization in India is in the acceleration phase with the urban population projected to increase to about 600 million in 2030 and about 800 million in 2050 when one out of every two Indian is expected to be living in urban areas.

Kingsley Davis, an eminent sociologist and demographer explains the urbanization process through its three stages. In the first stage, called the initial stage the society is primarily rural, settlements are dispersed, workforce is mainly occupied in agriculture and the growth rate of urban population is low. Urbanization level in the initial stage is below 10 per cent. As the urbanization level crosses 30 per cent mark, and structural transformation happens in the economy with rising contribution of industrial and service sectors in the GDP and increasing spending on social overheads, rural urban migration picks up and urbanization accelerates. This is the second stage, called the acceleration or the transition stage. When the urbanization level crosses 70 – 75 per cent, it is said to reach the terminal stage, and it stabilizes around this level.

Urban growth in India is in the transition stage and we may witness massive increase in urbanization and significant restructuring of the economy in next 15 to 20 years

Urbanization levels are often compared across countries and it is commented that urbanization level in India is low compared to countries like Brazil (87 per cent), Mexico (78 per cent), Indonesia (54 per cent) and China (45 per cent). While acknowledging the fact that urban growth in India has been sluggish with the urbanization level increasing from 17 per cent in 1951 to merely 31.14 per cent in 2011, we also need to acknowledge that the definition of urban varies from country to country. In India, the definition of urban is the census definition, which defines an urban area as all places with a municipality, municipal corporation, cantonment board or notified town area committee and all other places which have a minimum population of more than 5000, population density of at least 400 persons per sqkm and where at least 75 per cent of the male main working population is engaged in non-agricultural pursuits.

A section of urban thinkers feels that urbanization level in India may be underestimated due to the conservative definition of urban. Take for instance, the case of Mexico, where any locality with at least 2500 inhabitants is considered as urban. Similar is the case in many Latin American countries which follow a more liberal definition of urban. The Report of the High Powered Empowered Committee (HPEC) for estimating the investment requirement on Indian Urban Infrastructure and Services (2011) brings out that if villages with more than 10,000 persons in India were to be classified as ‛urban’, this would imply a level of urbanization in India in 2010 of over 35 per cent. So, we may be more urbanised than we think.

But why should we worry about urbanization and its level?

India needs to sustain a growth rate of 8 to 10 per cent per annum over the next two decades and the growth needs to be accompanied by full employment creation to provide jobs to youth and a decent quality of life to its citizens. Further, this growth would need to be broad based and inclusive to benefit all strata of the society. Research and global experiences show that such high level of growth is achieved with increasing urbanization due to mutually reinforcing agglomeration economies, growth in industrial and service sectors, gains in productivity and innovation in cities. There is strong positive correlation between degree of urbanization and per capita income.

However, it needs to be realized that urbanization may only be a necessary but not a sufficient condition for growth.

If the urbanization process is not managed in a proactive and efficient manner and economic, social and environmental dimensions associated with it are not balanced, the agglomeration economies may not be realized and in fact may turn into dis-economies (disadvantages that firms and governments accrue due to increase in firm size or output, resulting in production of goods and services at increased per-unit costs) in the form of increased traffic congestion on roads, shortages of housing, increase in slum population, lack of clean water, sanitation & waste management and increased land, water and air pollution leading to public health problems, increase crimes & social unrest and other negative externalities. So we need to really care about urbanization and about managing it efficiently so as to harness its full potential for sustaining high economic growth of the economy.

Government of India has launched the Urban Rejuvenation Mission in June, 2015 to efficiently manage the rapid urbanization and transform the cities into vibrant economic units and better living spaces for the people. The Urban Rejuvenation Mission comprises of three flagship programmes viz., Smart Cities Mission, Atal Mission for Urban Rejuvenation and Transformation (AMRUT) and Housing for All in urban areas. The Smart Cities Mission will develop 100 cities of excellence. AMRUT aims to upgrade key infrastructure including piped water supply and sewerage to all households, storm water drainage, walking and cycling infrastructure and green open spaces in 500 class-I cities. Government of India would be spending about Rs.1 lakh crore on Smart Cities Mission and AMRUT over the five year period from 2015 to 2020. Similar amount would be invested by State Governments and Urban Local Bodies. “Housing for All (HFA) in urban areas” aims to provide a house to every family residing in urban areas, by 2022. Housing shortage in urban India is estimated at about 20 million.

Another important urban sector programme launched by the Government is “Swachh Bharat Mission” which aims to make India open defecation free (ODF) by 2 October, 2019, which would be the 150th birth anniversary of Mahatama Gandhi, the father of the nation. The programme includes elimination of open defecation (ODF), conversion of insanitary toilets to pour flush toilets, eradication of manual scavenging, Municipal Solid Waste Management and bringing about a behavioural change in people regarding healthy sanitation practices and increasing awareness among citizens about sanitation and its linkages with public health. Policies to incentivize Waste to Energy, Waste to Compost, and construction & demolition waste management projects have been put in place to incentivize municipal waste management.

In addition to above, in order to preserve and revitalize the soul and unique characteristics of 12 heritage cities Government launched the National Heritage City Development and Augmentation Yojana (HRIDAY) in 2014. Funding of Rs 500 crore is being provided by the Central Government for HRIDAY projects.

A key feature of the Urban Rejuvenation Mission is to incentivize the States and Urban Local Bodies (ULBs) to implement urban sector reforms. Ultimately, the reforms and improved governance in cities would sustain the urban transformation. 10 per cent of AMRUT funding is linked to substantially implementing 11 key reforms related to E-Governance, constitution and professionalization of municipal cadres, augmenting double entry accounting and credit rating of ULBs, urban planning and city level plans, devolution of funds and functions, review of building by laws, setting up financial intermediary at state level, municipal taxes and fees improvement, improvement in levy and collection of user charges, energy and water audit and related to Swachh Bharat Mission – elimination of ODF, 100 per cent collection, transportation and scientific disposal of waste.

Many key reforms are inbuilt in the Smart Cities and Housing for All Mission. Smart Cities Mission has brought a paradigm shift in the approach to urban development from a top down approach to a citizen participatory approach. The Smart Cities are being selected through a competitive challenge process amongst States and there is immense citizen participation in preparation of Smart City Plans and proposals. Within a period of 15 months of launch of Smart Cities Mission, progress has been phenomenal. 60 Smart cities have already been selected through nationwide competitive challenge process involving significant citizen participation. Investment of Rs.1,44,742 crore has been proposed by these 60 cities. 20 of these cities have formed SPVs and are moving ahead with implementation of projects. Remaining SPVs are being formed. 68 projects were launched in June 2016 and another 114 projects are under bidding.

Centre is also handholding the States and ULBs to obtain resources from various domestic and multilateral lending agencies. This includes US $ 5 billion from Asian Infrastructure Investment Bank, US $ 1 billion from ADB, US $ 500 million each from JICA and BRICS Bank and 100-200 million euro from AFD and likely Rs 10,000 crore from HUDCO. Till September 2016, investment of Rs 1.24 lakh crore has been approved by the Ministry of Urban Development for improving urban infrastructure through AMRUT and Smart Cities – Rs 45,935 crore under AMRUT and Rs 78,000 crore for 33 Smart Cities. (source: PIB release date 6.9.2016)

The Urban Rejuvenation Mission launched a year ago has kick started the process of urban transformation and substantial progress has been made in the last one year. Now the pace needs to be accelerated by meticulous implementation of the projects and the reform agenda envisaged under the Mission.

(The views expressed are personal)

Profile photo of Jeetendra Singh
Jeetendra Singh is Director, (Managing Urbanization) at NITI Aayog, where he is working on Public Policy and initiatives focusing on transformation of urban sector. He has previously worked as Director, (PPP & Infrastructure) Planning Commission. Views expressed are personal.