The recent report titled “Financing India’s Urban Infrastructure Needs: Constraints to Commercial Financing and Prospects for Policy Action” released by the World Bank highlights the urgent need to increase private and commercial investments in order to fill the emerging financial gaps in Indian urban infrastructure. The report emphasizes several critical points that express the urgency of the situation.
Report Highlights
According to the report, over the next 15 years, India will require a staggering investment of USD 840 billion in urban infrastructure to meet the needs of its rapidly growing urban populace.
By 2036, an estimated 600 million people, representing 40% of the population, are expected to inhabit urban cities in India. This exponential growth is likely to place an additional strain on the already stressed urban infrastructure and services, including clean drinking water, reliable power supply, and efficient road transport.
Currently, the central and state governments finance over 75% of city infrastructure, while the Urban Local Bodies (ULB) contribute 15% from their surplus revenues. Private sources account for only 5% of the infrastructure needs.
Slow Implementation of Central Urban Missions
The report further notes a slow implementation performance by states and Urban Local Bodies on several of the Centre’s flagship Urban Missions. These include the Smart Cities Mission (SCM) and the Pradhan Mantri Awas Yojana (PMAY). The constraints on implementation capacity at the city level have hampered the progress of these missions.
ULBs across India have so far executed only about one-fifth of the cumulative cost of approved projects under SCM and Atal Mission for Rejuvenation and Urban Transformation (AMRUT) over the last six fiscal years.
Decline in PPP transactions for Urban Infrastructure
Public Private Partnership (PPP) transactions for urban infrastructure in India have shown a marked decline in both monetary value and transaction volume in the last decade. Since 2000, 124 PPP projects worth a total of USD 5.5 billion have been awarded in the urban sector. However, the awarding of PPP projects has declined significantly after a spike between 2007 and 2012.
Suggestions for Improvement
The report recommends expanding the capacities of city agencies to deliver infrastructure projects at scale. At present, the ten largest ULBs have only managed to spend two-thirds of their total capital budget over three recent fiscal years.
In the medium term, the report suggests several structural reforms, including modifications in taxation policy and fiscal transfer systems, to enable cities to leverage more private financing. The report also proposes making fund transfers to cities formula-based and unconditional, and gradually increasing the mandates of city agencies.
Understanding Urbanisation
Urbanisation refers to the population shift from rural to urban areas, along with the ways societies adapt to this change. Causes of urbanisation include the natural increase in population and migration from rural to urban areas due to various pull and push factors, such as employment opportunities, educational institutions, and urban lifestyle.
India’s Initiatives for Urbanisation
India has implemented several schemes and programmes related to urban development, including the Smart Cities Mission, AMRUT Mission, Swachh Bharat Mission-Urban, HRIDAY, and Pradhan Mantri Awas Yojana-Urban. Government initiatives for slum dwellers and urban poor include the Pradhan Mantri Garib Kalyan Yojana and the Atmanirbhar Bharat Abhiyan (self-reliant India).
The insights and suggestions provided in the World Bank report offer a critical blueprint for dealing with the pressing problems of urbanisation in India. With strategic implementation, they hold the potential to transform the urban landscape in the country.