Indias steady urbanisation has the potential to bring in investments of R120-150 trillion over the course of the next 11 years till FY25, says the Kotak Institutional Equities report titled Multiplicities. City expansions will call for a dramatic increase in (i) housing stock, (ii) transport infrastructure, and (iii) utilities, like power and water. Investment in these segments would be at $2-2.5 trillion over the next 11 years to FY25, noting that Indias GDP in FY14 was $1.9 trillion. India will therefore need to invest between 8 and 10% of its GDP on developing its urban infrastructure. India overall invested 34.7% of its GDP in FY13.
Indias urbanisation call for 2.5 billion tonnes of cement, 650mt of steel and 4.6 mt of paints over the next 11 years. To put this in perspective, installed capacities in these sectors as at the end of FY14 are: 369 mt of cement, 94.3 mt of steel and 2 mt of paints. Urbanisation will also lap up 1.5m km of new roads and 35b sq. ft in new housing. The magnitude of investments required for this scale-up in urban infrastructurein terms of capital goods as well as servicesis large enough to kickstart Indias moribund capital cycle and trigger the next leg of economic growth, says the report.
As India re-imagines its urban landscape, it needs to focus on making its top-100 cities livable rather than creating 100 new cities. Indian cities rank very poorly when compared to their international counterparts. New Delhi and Mumbai rank 46 and 52, respectively, on the Spatially Adjusted Liveability Index and 52 and 53 on the Economist Intelligence Unit Liveability Index, in 2013.
Actually, the idea of creating new cities belongs to the era of manufacturing-led growth, something that has not been the case for India. Even if this evolves with the development of infrastructure like the Delhi-Mumbai Industrial Corridor (DMIC), which is expected to give a big push to manufacturing, this will lead to the seeding of, at best, a handful of cities (seven planned currently).
Indias services-dominated economy will see its current pint-sized cities burgeoning into massive urban sprawls. Consider Mumbais density, where 17.7 millio people live within an area of 546 sq. km, while Shanghais 22.7m citizens sprawl across 3,626 sq. km, an area 6.5 times larger than Mumbai. Tokyo, with twice the population of Mumbai, is 15 times largerthe worlds most populated city has 37.6m citizens sprawled over 8,574 sq. km.
Even if Indias area under urbanisation doubles in the next decade, it will still account for a mere 0.6% of the countrys land area. This should belie concerns that cities will overrun agricultural or forest landfears that underpin many of the policy constraints in urban expansion.
Indias urbanisation will most probably lead to mega-urban regions. In this context, the National Capital Region and the extended city of Mumbai have expanded in every direction so that they could find or create land. We should expect to see cities start to coalesce towards each other (Indore-Dewas, for example). If infrastructure like the Delhi-Mumbai Industrial Corridor spurs manufacturing activities along its length, we may well see the phenomenon of the urban corridor develop. Ultimately, the geographic expansion of Indian cities will be driven by (i) easy intra-city travel, aided by increasing purchasing power and better infrastructure and (ii) by the growth of satellite hubs that focus on particular specialisations.