The discussion on urbanisation in India has focused largely on the need for infrastructure development and how to fund it. In my previous article (http://goo.gl/uCWXQA), I had highlighted the importance of greater empowerment of cities with effective transfer of functions and greater devolution of funds to ensure better service delivery. But urbanisation in the context of rapid economic growth poses an additional challenge of metropolitan development which cuts across cities and is rarely discussed.
A metropolitan region is an economic construct which can be thought of as a primary city forming the core of the region and adjacent cities and towns connecting with it. This forms a unified market covering several cities, towns and surrounding areas. It reinforces the agglomeration economies which arise from localisation, urbanisation and networking. These economies lead to productivity gains and cost saving in the movement of goods, people, ideas and knowledge. The geographical boundaries of the region change as the economy changes.
Metropolitan regions play an important role in fostering connectivity and competitiveness. The metropolitan regions of Mumbai, Chennai, Bangalore, Kolkata and Hyderabad together contribute 11% to the GDP of the country. Mumbai and Bangalore metropolitan regions contribute 35% and 38% to the respective state GDPs. However, an institutional structure that can provide metropolitan governance is missing.
Metropolitan regions in India are being generated by default through economic forces, and not by design through supportive government policies. As a result, they do not benefit as much as they could from the expected benefits of agglomeration. For example, these regions suffer from utter lack of transport infrastructure which constrains them from exploiting agglomeration and network economies for growth.
The 74th Constitutional Amendment provides a framework for metropolitan planning and development for the provision of infrastructure development, environmental conservation, spatial planning and sharing or pooling of resources. But the Metropolitan Planning Committees (MPCs) for preparing draft development plans have been set up only in a few states, and even there, they have not been operationalised. If a chief minister of a state were to head the MPC in the state, it should make a difference. Metropolitan regions are, in effect, de facto entities somewhere between the state and local governments. Although considerable discretion is given to state governments in determining the administrative boundaries of metropolitan regions, these have typically not been set keeping in mind the need to create a unified market forging strong economic linkages between the core city and the periphery.
The 74th Constitutional Amendment also has no provision for planning and development of metropolitan regions which involve spillovers beyond state boundaries. Thus, if Ghaziabad, Noida and Gurgaon are part of the National Capital Region (NCR), the NCR Planning Board has no teeth in planning and implementing a connectivity plan for these cities with Delhi. If these cities were empowered with functions and funding, they could choose to come together and allocate funds to reap benefits from greater connectivity within the metropolitan region. But the state governments to which they belong may have different priorities.
It is no surprise, therefore, that although the Indian economy has grown rapidly since 2003-04, there has not been a corresponding evolution of vibrant metropolitan regions. Essentially, India’s rapid economic growth has been associated with premature industrial suburbanisation. Manufacturing is relocating to suburbs before being able to harness the potential of agglomeration economies. International experience suggests that metropolitan concentration typically increases until per-capita income reaches $7,000-10,000. In India, metropolitan de-concentration has happened at a much earlier stage of development (Urbanisation beyond Municipal Boundaries, World Bank 2013).
An important reason for this is highly restrictive land-use policies, including very low FSI (floor-space index) regulations, and stringent building regulations in the cities which prevent redevelopment of the core of the city and push out investors, workers and those in search of housing. The result is that development has tended to sprawl outside city limits. High transaction cost of doing business in the formal sector also pushes investments in the informal sector. The peripheral towns and villages are crying for infrastructure in the face of the spillovers of growth, while connectivity of the periphery to the core remains weak. We have seen land scams, real estate development scams, and haphazard spatial footprint of rapid economic growth.
And yet it is clear that there are large dividends that can be harnessed and nurtured through metropolitan and regional planning and development. For example, land-use planning in Delhi has been with the DDA (Delhi Development Authority), while DMRC (Delhi Metro Rail Corporation) has been planning and implementing mass rapid transit for the past several years. The two came together in a framework of integrated land-use and transport planning when, about six years ago, DDA made a grant of R700 crore to DMRC for the metro line to Dwarka. The commissioning of this line has reduced commuting time from Dwarka to Central Secretariat in Delhi from one-and-a-half hours by road to less than 30 minutes. On a larger scale, in an initiative to promote strategic densification of transit nodes, Transit-Oriented Development Policy was notified by the ministry of urban development, government of India, in July 2015, and the Rules are expected to be notified soon. This should have a salutary effect on the ability of the region to realise its growth potential.
Financing for metropolitan development will have to rely on unlocking land value through instruments such as impact fee and tax increment financing. Since costs and benefits of infrastructure development are not equally distributed within the region, cooperative financing arrangements will have to be devised within the federal framework with active engagement of the cities and towns in the region.
Externalities in the case of transport connectivity are very obvious. But even in other areas such as landfills or waste-to-energy plants for solid waste management or water and sewerage provision for small urban local bodies, scale economies can be reaped by operating at the metropolitan region level. An example of a successful case of inter-municipal cooperation is the STEM Water Authority, set up and managed by the Thane Municipal Corporation, Mira-Bhayander Municipal Corporation and Bhiwandi-Nizampur Municipal Corporation together with 34 villages in the Thane district. The authority operates and maintains the Shahad Themgar Water Works and supplies water to the urban local bodies and villages.
It is clear that only when cities are empowered that innovative and cooperative solutions will emerge to address the metropolitan development challenge that India faces in the years ahead. The solution will depend on what it takes to resolve the political tension between the corporator and the MLA for power sharing.
The author is chairperson, ICRIER, and former chairperson, High Powered Expert Committee on Urban Infrastructure and Services