A recent background paper on urbanisation has pointed out that India has spent less than 2% of its eleventh plan outlay on urban development. The statistic is a good evidence as to why the squalor that is synonymous with Indian towns shows little reduction.
The fantastic number is surprisingly from a government document ? one of the sectoral papers developed for building up the 12th Five year Plan. The sum juxtaposed against the spend on rural development at over 25% of the plan spend shows up a huge problem.
Since Census documents show the poor are now increasingly concentrated in urban areas, this means the per capita government spending on them is far less than what the national average would show.
The statistics are also part of a report ? Urban India 2011, which was released by a clutch of NGOs working on urban problems, in collaboration with Yale University and the government of India, at the India Urban Conference in New Delhi last week.
Aromar Revi, director of Indian Institute for Human Settlements uses the number to buttress his argument why Indian urbanisation pattern is becoming a disaster. The report is one of the rapidly emerging set of documents tracking the route urban India is taking in the 21st century.
As urban India accounts for two thirds of the annual GDP, underspending there could be fatal to the India growth story.
All this is happening as India faces an urban explosion that has only one comparable scale in the world, next door China. A report released last week by Beijing shows that 50% of the country?s population now lives in urban areas. India is catching up. A Mckinsey report says by 2030 nearly 590 million people will live in Indian cities, double the population of the United States. That figure could be an under-estimate.
But despite these numbers, the under-spending by the government is not surprising as the demand from the political class for urban areas is still muted. But that picture could be changing.
The Planning Commission, which had drawn up the data on relative spend on sectors, has now removed it from its website as the numbers are bound to generate strong criticism. A decade ago the same numbers would have passed unnoticed.
Speaking at the another leg of the same India Urban conference at Mysore, minister for urban housing and poverty alleviation Kumari Selja held out a R5,000-crore slum free India scheme as a ray of hope for a committed higher government spend for this critical sector. That is about the maximum the Centre can take on now. Of the R12,57,729 crore allocated overall for Budget 2011-12, less than 1.5% is marked for urban development. The budget of the two ministries involved with these sectors, Selja?s and next door Kamal Nath?s ministry of urban development, have a combined spend of R15,900 crore. The state governments among themselves spend another R30,000 crore on urban areas of their total R11,74,584 crore of Budget (2010-11). None can spend more with a fiscal deficit threatening to explode.
At the other end, the urban bodies do not have the capacity to spend more rationally. The government?s high-power expert committee that estimated the investment requirement of urban bodies in 2011, shows their own revenue is just 1% of the GDP. In the largest city of Delhi, the municipal council has just one IAS officer as the municipal commissioner with the rest drawn from various departments spending on an average of less than three years in any department of the corporation.
The alternative is coming up from plans like those drawn up by the Delhi Mumbai Industrial Corridor Development Corporation (DMICDC). Its CEO and managing director Amitabh Kant is keen to show any visitor who drops into his office, how his corporation will bifurcate plans to raise funds and administer city facilities.
Kant?s team has been given the charge of developing India?s largest investment region that will include 12 cities between Delhi and Mumbai, which will constitute a large part of the urban India map by 2050. It could seem a long time away, but Kant says the time to raise resources is now. And the model developed by the DMICDC with the department of industrial policy and promotion gets around the limited fund-raising capacity of the municipalities by providing an umbilical cord from the central government.
The funds will be raised by the Centre as debt from multilateral organisations, others like JBIC and JICA and scores of sovereign funds. The money will flow into a trust that will be run by four secretaries of the government as a revolving fund. DMICDC will be the knowledge partner to it with its CEO as the member secretary of the trust. The company will also be responsible for managing the fund.
Under the rubric of the corporation will spring up sectoral holding companies for power, transport, water and housing. Those in turn, could form special-purpose vehicles to take up projects in specific cities, each raising fund initially from the trust as debt or equity and then leveraging those to tap the capital markets.
The trust will also invest in nodes to be set up at each city level. Basically, these will bypass the current municipal structures of cities.
The nodes will have the financial muscle to funnel investment into the city by jointly setting up project companies with the specialist water or city power distribution companies.
The details are still being filled in but already this seems a workable blue print for urbanisation.
