Urban financing for India is a case of a top down approach that is over dependent on technocentric solutions and capital-intensive technologies. Comment
- Urban financepredominantly comes from the government. 48%, 24% and 15% of urban capital expenditure needs are derived from the central, State, and city governments, respectively. Public–private partnership projects contribute 3% and commercial debt 2%.
- Various reports have estimated a huge demand for funding urban infrastructure. The Isher Judge Ahluwalia report says that by 2030, nearly ₹2 lakh crore would be required. A McKinsey report on urbanisationhas a figure of $1.2 trillion, or ₹90 lakh crore.
World Bank report on urbanisation in India
- It estimates that nearly ₹70 lakh crore would be needed for investment in urban India to meet the growing demands of the population.
- It suggests improving the fiscal base and creditworthinessof the Indian cities. Cities must institute a buoyant revenue base. They must be able to recover the cost of providing its services.
- This report points out that nearly 85% of government revenue is from the cities.
- Its emphasis is on the levying of more burdens in the form of user charges on utilities, etc.
- It focuses on private investments
- State-level management of urban water and sewerage functionsmay be devolved in a time-bound manner.
- An improved urban legal frameworkthat includes a stable and certain fiscal transfer regime, accords financial powers to ULBs will determine the future of cities.
Issues with urbanisation in India
- The basic problem with the reports on urbanisation in India is that they are made using atop to bottom approach. They have too much of a focus on technocentric solutions using very high capital-intensive technologies.
- Cities primarily are run byparastatals.The city governments hardly have any role to play in the smooth functioning of such parastatals.
Looking forward
- Plans must be made from below by engaging with the people and identifying their needs.
- Empoweringthe city governments and the people at large is the need of the day.
- The national task force to review the 74th Constitutional Amendment by K.C. Sivaramakrishnan provides many suggestions. It asks for empowering the people, transferring subjects to the city governments.
- It suggests that 10% of the income-tax collected from cities be given back to them and ensuring that this corpus fundwas utilised only for infrastructure building.
- There is a need to improve urban governance. Regular elections should be held in cities and there must be empowerment through the transferring of the three Fs: finances, functions, and functionaries.
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