- A McKinsey Global Institute report 2010 estimated that India needed capital investment of $1.2 trillion over 15-20 years to meet its urban requirements. India’s per capita urban investment is ₹2701, which falls short of the required ₹7884. This gap in the financing of urban infrastructure adversely impacts the ease of living and doing business in our cities.
Trends and Scope of Urban Investment in India
- Urban Surge Ahead: India’s urban population is expected to grow from 377 million in 2011 to nearly 600 million by 2036, marking a historic demographic shift (MoHUA).
- Urban Economic Engine: Cities currently contribute over 63% of India’s GDP, which is projected to rise to 75% by 2030, driving national economic growth (NITI Aayog).
- $1.2 Trillion Infrastructure Need: India requires an estimated $1.2 trillion investment by 2036 to bridge urban infrastructure gaps (McKinsey Global Institute, 2010).
- Affordable Housing Crisis: India faces an urban housing shortage of 18 million units, primarily among economically weaker sections (MoHUA, 2023).
Need for Urban Investment in India
- Rising Urban Population: India’s urban population is expected to grow from 377 million (2011) to 600 million by 2036, necessitating massive infrastructure expansion.
- High Contribution to GDP: Urban areas contribute over 63% of India’s GDP, which is projected to reach 75% by 2030, underlining the need for sustained investment to support economic productivity.
- Housing Shortage: Urban housing shortage of around 18 million units, primarily affecting economically weaker city sections (MoHUA).
- Inadequate Urban Infrastructure: India needs to invest $1.2 trillion in urban infrastructure over two decades to meet basic urban service standards (McKinsey report).
- Growing Urban Poverty and Slums: Over 65 million people live in urban slums (Census 2011), lacking access to clean water, sanitation, and secure housing.
- Climate Resilience and Sustainability: Urban areas are highly vulnerable to climate risks, and investments are needed to meet SDG and climate goals.
Key Challenges Hindering Urban Investment in India
- ULBs’ Limited Fiscal Autonomy: Urban Local Bodies generate only 0.45% of India’s GDP Vs 2% average in developing nations, hampering their ability to fund infrastructure (RBI).
- Institutional Weaknesses in ULBs: About 70% of ULBs lack qualified town planners and engineers (NIUA, 2022), severely impacting urban planning and project execution.
- Neglect of Smaller Urban Areas: Despite 40% of urban growth in Class-II and III towns, these areas remain underfunded and poorly planned (NIUA).
- Service Exclusion in Slums: Over 65 million urban poor live in slums with limited access to water, sanitation, and housing (Census 2011), reflecting deep service inequities.
- Overlapping Urban Governance: In cities like Delhi and Mumbai, 20 or more agencies function simultaneously, causing coordination failures and inefficiency (MoHUA).
Government Schemes Driving Urban Investment in India
- AMRUT 2.0 (Atal Mission for Rejuvenation and Urban Transformation): Aims to provide universal water supply, sewerage, and improved urban infrastructure in 500+ cities.
- Smart Cities Mission: Focuses on integrated city planning, smart governance, mobility, energy, and urban services in 100 selected cities.
- PMAY-U (Pradhan Mantri Awas Yojana – Urban): Promotes affordable housing for all urban poor through subsidies and incentives to boost real estate and construction.
- Swachh Bharat Mission – Urban 2.0: Drives investment in sanitation infrastructure, solid waste management, and cleaner urban environments.
- National Urban Digital Mission (NUDM): Supports digital infrastructure in cities to streamline service delivery and improve urban governance.
- Urban Infrastructure Development Fund (UIDF): Launched in Budget 2023–24 with ₹10,000 crore corpus to finance Tier-2 and Tier-3 city infrastructure.
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Key Measures to Strengthen Urban Investment in India
- Increase ULB Fiscal Autonomy: Empower Urban Local Bodies to raise their revenues, which currently form only 0.45% of India’s GDP (RBI).
- Promote PPP Models: Expand public-private partnerships to attract private capital for infrastructure and innovative city projects.
- Scale Affordable Housing Investment: Bridge the 10 million urban housing deficits by incentivizing EWS/LIG housing through PMAY-Urban.
- Access Climate Finance: Utilize global climate funds to support green infrastructure like EVs, solar rooftops, and resilient buildings.
- Build Planning Capacity: Recruit qualified urban planners in ULBs, where 70% lack technical expertise.
Way Forward
The Prime Minister said, “Urbanisation is not just about building infrastructure but creating a sustainable ecosystem for citizens”. By bridging the urban investment gap and empowering ULBs, India can achieve SDG 11 (Sustainable Cities) and SDG 8 (Decent Work), building resilient and inclusive cities for the future.
Reference: LiveMint
PMF IAS Pathfinder for Mains – Question 208
Q. Despite rapid urbanisation, India faces a significant gap in urban infrastructure investment. Analyse the key reasons for this gap and suggest viable measures to boost urban infrastructure financing. (150 Words) (10 Marks)
Approach
- Introduction: In the introduction, write current context of urban infrastructure investment.
- Body: Analyse key reasons for the gap & suggest viable measures to boost urban infrastructure financing.
- Conclusion: Emphasis on multi-pronged approach involving fiscal reforms, private sector participation, and empowered urban governance.
