Pragati Manifesto

Urbanization: No City-Dweller Left Behind

This section of the Pragati Manifesto lays out how to plan for our urban future. Read the other pieces here.

In the run up to the 2019 national elections in India, the conversation is dominated by concerns over agricultural distress. This is no doubt a crucial issue, but given the declining state of urban infrastructure and service delivery, one wonders why urban distress isn’t a larger political issue.

Over the years, there has been persistent policy neglect of our cities. Some of this stems from the post-Independence narrative that India lives in her villages. Even with the introduction of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and the Smart Cities Mission, financing and policy attention remain disproportionately skewed to rural areas.

Official estimates uphold this narrative. India defines urban areas using two official definitions – the statutory definition and the Census definition, which are determined using different thresholds. According to the statutory definition, India is 26% urban. By the Census definition, India is 31% urban. It is important to note that only statutorily notified cities have a municipal government. Census towns – that is, settlements recognised by the Census but not by their state government as urban – are governed by panchayats. In a country with our population, this 5% gap represents 55 million people (approximately the population of South Africa) that live in dense-urban like settlements but have a local government with no mandate to provide basic services, such as fire safety and sewage lines.

There is no global definition of what constitutes an urban area. But there is now ample evidence to show that if one uses alternate definitions of urban, we would get very different outcomes. At IDFC Institute, we picked between various global definitions and used two of the most common ones: using Mexico’s definition for instance, India is 65% urban; using Ghana’s definition, it is 47% urban. Others have undertaken a similar exercise. The World Bank’s Agglomeration Index, which uses a mix of factors to determine how urban an area is, put India at over 50% urban in 2001.

The key point is not that there is a singular way to measure urbanisation, but that the metrics we use could be obscuring the reality beneath our eyes. Hence, while there is no absolute number that can be attributed to India’s current urban areas, it is evident that India is certainly more urban than we think.

Why does this matter? For one, a large share of the population (at over 50% urban this could be ~250 million people) is forced to live without urban basic services and is grappling with inadequate public service delivery. The slums and informal settlements in most of our cities are direct outcomes of failing to cater to migration at an earlier point in time. Even while we close our eyes to the reality of urban growth, cities and peri-urban areas are continuing to grow, leading to urban sprawl that goes well beyond administrative boundaries. This growth is haphazard and unregulated. Consequently, the quality of the urban fabric – measured by the share of land in streets, access to open space, formally subdivided plots and so on – declines. Down the line, it is both difficult and expensive to retrofit this growth with wider streets and development infrastructure. For instance, in Kozhikode in Kerala, between 1991 and 2014, the share of narrow <4 metre roads rose by 18% but the share of wider roads has remained the same or reduced. Road infrastructure has not been able to keep up with urban growth, leaving the city with very little space for mobility.

Urban realities matter because, above all, cities are the drivers of growth. Cities allow for economies of scale and agglomeration, which in turn enable greater productivity and growth. According to the World Bank, globally, over 80% of GDP comes from cities. Urbanisation and growth have been correlated over time. Yet, more recently, there is evidence of urbanisation without growth, possibly due to congestion effects. As Alain Bertaud explains in his 2018 book Order Without Design: How Markets Shape Cities, cities, at their core, are labour markets. Maintaining mobility of labour across and between labour markets is crucial to reap the economic benefit of cities. This means that unplanned growth could limit the prospects for economic growth by imposing heavy costs (time) on the intra-city labour mobility. In particular, given the services bent of the Indian economy, the policy push for job creation will increasingly locate itself in cities. Maintaining mobility within cities also means ensuring the availability of affordable housing (with a vibrant rental market), efficient land markets that allow for changing land use, and an inclusive urban culture that eschews segregation.

So what do we do? 

One: Recognise Growth as It Happens

First, we must recognise growth as it happens, so that we can prepare for it instead of playing catch-up. While no single definition is perfect, governments could track density on a sliding scale (i.e. defining appropriate levels of service provision at different levels of density) and contiguity. For the latter, satellite data is useful because it doesn’t artificially force measurement within administrative units, and also helps anticipate the direction of future urban growth. City boundaries and municipal jurisdictions should then be expanded as necessary over time.

Two: Plan Ahead for Urban Growth

In 1811, when New York was a small town concentrated at the tip of the island, the Commissioners Plan for New York laid out a notional grid extending further uptown, that could be built out if and when the city expanded. Today, that grid forms the core and backbone of New York City, even as its population has doubled and tripled. The grid carries roads, core infrastructure and transit, and allows for mobility within the city as it expands. While land use and economic activity in the city has reinvented itself over time, the grid itself remains sacrosanct.

The Indian development plan mechanism does require that cities anticipate and plan for future growth, but plans are rarely made on time and enforcement is weak. Growth in peri-urban areas continues, with little regard to the plans on paper. Moreover, plans are overly prescriptive. They attempt to predict and prescribe land use in ways that are impossible to determine over the 20-30-year horizon for which they are made. Instead, they should be simplified merely to reserve and protect ‘rights of way’ – most often comprising an arterial grid network of major and minor streets that can carry transit as well as development infrastructure.

While several global cities, from Barcelona to several in Colombia and Ethiopia, have implemented such measures, Ahmedabad is the only Indian city to have planned ahead for urban growth by using the town-planning mechanism to reorganise rural plots in its peri-urban regions. The local administration identifies a block for development, borrows an equal amount of land from each of the farmers (usually two-fifths of the total area), and then re-organises the plots so that land is returned in neater, more orderly parcels. The land acquired is then marked for roads and underlying infrastructure.

Three: Overhaul the Master Planning Approach

Most of us could not predict the technological, societal, and economic shifts that have occurred in the past decades. Yet, the current master planning approach assumes that planners have the clairvoyance to predict the future. As a result, plans include a multitude of restrictions and reservations that stifle cities, encourage informality, and prevent them from evolving over time. For instance, current plans with zones for telephone exchanges do not consider technological changes.

As land uses become obsolete, cities need to be equipped to repurpose that land. Similarly, while planners may choose to zone land for social amenities — schools, hospitals or burial/cremation grounds — these reservations necessarily need to be minimal. When some of these amenities become obsolete, the plans are subject to violation. Violations often occur because plans cannot keep up with what the market demands and how economic activity is changing.

There is no doubt that planners play an important role in regulating market demand, but they need to do so in a holistic manner. For instance, planners could reserve floor area, and not land, for a hospital. After all, hospitals can be built vertically. The world’s most dynamic cities, including New York, Barcelona, and others, have reimagined and reinvented themselves over time. We must unshackle our cities to allow them to do the same. Hence it becomes important to focus on simple plans that emphasise grids and reserve space for basic amenities.

Four: Create More Public Open Spaces

In spite of our planning, we have a very low share of land in streets and in the public domain. Globally, well-planned cities have about 30%-40% of their land in public open space, such as in roads and in gardens. The rest of the land should ideally be occupied by building footprints. Indian cities, in comparison, have much lower share of land in public open space. For example, in Lower Parel, a recently booming business area in Mumbai, the share of land as public open space is as low as 12%. However, the share of land in buildings is much lower too, at 49%. Most of the land – 39% – is frittered away in set back areas and other requirements, which are sub-optimally used, contributing to greater congestion over time. Moreover, limiting land utilisation in cities makes land more expensive and therefore makes housing less affordable.

Five: Aim for Sustainable Cities

A city’s sustainability footprint is influenced by its built form, energy sources, and myriad other factors that can be influenced and improved by smart policy and technology choices. Research by Edward Glaeser and Matthew Kahn shows that central cities have significantly lower per capita carbon emissions than suburbs in almost every metropolitan area in the United States. In India, Navi Mumbai and Chennai are among those cities that have mastered the process of prioritising sewage treatment, with capital and operating expenditures low enough for sustainable provision by local municipalities. This is offset by selling high volumes of water to various industries. However, with a few exceptions, the current status of urban sprawl in India locks us into an unsustainable urban fabric.   Therefore, master planning of Indian cities needs to be executed in a sustainable manner.

Six: Strengthen Governance Mechanisms Between Cities

To strengthen governance, municipal bodies need to coordinate both within local and with higher levels of government. As urban sprawl develops, metropolitan regions (as opposed to individual cities) become important economic drivers and labour markets. For example, the Mumbai Metropolitan Region (MMR) includes eight municipal corporations, nine municipal councils and more than 1,000 villages, but they all economically function as one integrated labour market. However, currently, these local bodies plan for services and infrastructure within their administrative borders. Moreover, jurisdictions between multiple departments and parastatals for urban planning, housing, infrastructure and public service delivery often overlap. Hence, while economic policy is largely decided at the national level, it is crucial that cities interact with higher levels of government as well as set up coordination mechanisms since the effects of such policies play out largely in cities. At the sub-national level as well, it becomes important to recognise that there are certain functions that work better at the state level (such as investment in public transit) and at the local level (such as waste management). An international example of such a governance structure is in London where determining usage of land for transport infrastructure is determined at the metropolitan level whereas other services are delegated to local bodies.

Seven: Use Transport as a Medium to Tie Together Labour Markets

Today, most large Indian cities are growing spatially into urban peripheries, away from the centre. These urban peripheries become part of a ‘spatially integrated labour market’ of the city. As mentioned above, the existing institutional set-up — with multiple authorities and few coordinating mechanisms — precludes the conception and implementation of integrated plans to create fluid labour markets, limits connectivity within the broader economic region, and increases the cost of transportation.

Investing in affordable, safe, and accessible modes of transport will enable the efficient functioning of labour markets, thereby tying them together. Mass public transport opens up more job opportunities for the labour force and conversely, provides firms with access to a greater pool of skilled labour. It creates multiple benefits such as reducing household expenditure on transport, allowing people to live further away from the central business district and reducing over-dependence on cars (and the need for on-site parking in residential buildings). Furthermore, such transit systems lower environmental costs by lowering vehicular emissions and increasing access to developable land.

Eight: Invest in Soft Infrastructure

It must be recognised that cities are about people, not buildings. Therefore, the quality of life in urban centres is also determined by ‘soft infrastructure’, i.e. the elements that attract people to cities. These include a vibrant local culture, libraries, museums, theatres, restaurants, entertainment, and so on. Cities are places where diversity should be welcomed because that is what makes them unique and allows them to thrive. Therefore, it becomes important for local authorities to focus on and to develop these aspects for a young and globally exposed population.

‘Soft infrastructure’ can also have ripple effects with real economic value. For instance, the Louvre in Paris had 9.3 million visitors in 2013, while the British Museum in London had 6.7 million visitors. Additionally, museums in the United States employ 400,000 people and directly contribute $21 billion to its economy. However, currently, we see a lot of unnecessary focus on limiting the growth of cities versus providing incentives to grow soft (and physical) infrastructure, such as in the arguably controversial move to bring companies like Amazon to New York or Washington DC. Given its positive economic impact as well as other benefits, investing in soft infrastructure will enable Indian cities and city-regions to reach their potential as centres of prosperity, innovation, and job creation.

Nine: Raise Infrastructure Investments

None of the above is possible without adequate financing and capacity. Private capital is unlikely to fill the majority of the investment gap in urban infrastructure. The government will necessarily need to play a larger role in raising infrastructure investments. That being said, the most overlooked and straightforward means of raising finance would be the sale or leasing of public lands by government departments. Most government departments own large parcels of land in cities, which are often grossly underutilised. A paper by the India Development Foundation estimates the large land inventory held by public institutions: the 13 major Port Trusts in India hold 100,000 hectares of land, the Airports Authority of India holds 20,400 hectares and another massive chunk of 43,000 hectares of unutilised land is owned by Indian Railways, of which even a fraction can finance world-class infrastructure in the area. However, leasing land may prove to be a more attractive option since it ensures a revenue stream as opposed to a windfall gain to authorities from a sale.

Ten: Devolve Funding to Cities

In addition to leveraging public lands, it is also critical for cities to benefit from the economic activity that they drive. McKinsey & Co. estimates that cities will generate 85% of tax revenues by 2030. The 13th Finance Commission of the Government of India suggested that the Goods and Services Tax (GST) was well suited for direct allocation to local governments. In the subsequent rollout of GST, no such allocation was made. This is despite the fact that GST replaced the octroi, which formed a significant part of city revenues. Higher levels of government, and particularly state governments, must recognise the need to devolve more funding and expertise to their growth centres.

Local bodies face severe capacity constraints, both in terms of staffing and managers possessing the requisite managerial skills. Indian cities fall behind international peers on the staff-to-population ratio. Janaagraha’s Annual Survey of India’s City-Systems states that Mumbai has about 1300 staff for every 1,00,000 citizens, compared to New York, which has about 5000 employees. However, the problem is also of competence and skills to administer and undertake highly specialised roles which requires an overhaul of the recruitment framework.

Ultimately, the integrated process of financing and planning will hinge on critical governance reform: fostering coordination between levels of government, building autonomy and capacity of local governments, and untangling overlapping jurisdictions between urban and rural areas.

Improving urban governance will propel India’s growth story

As we have outlined, cities are drivers of economic growth and are labour markets that promote economies of scale and agglomeration. The misclassification of urban and rural areas leads to uneven public service delivery, which can be dangerous to and negatively impact quality of life in cities. Hence, there emerges a need to recognise growth as it happens by planning ahead for it, efficiently improve land utilisation, use transport as a mechanism to effectively link labour markets, streamline government coordination, and cultivate soft infrastructure across urban centres. Moreover, the key to enhancing quality of life in cities will largely depend on adequate financing and improving the capacity of urban local bodies.

Two hundred years ago, less than 3% of the world lived in cities. Today, that number is over 50% and it will only keep increasing. Hence as cities will inevitably continue to grow, it becomes necessary to recognise ‘urban’ and ‘rural’ spaces as a continuum, not a dichotomy. And as several definitions of urban areas illustrate, India ranges between 26% and 65% urban. Furthering the conversation to planning for future urban growth will hence boost not only economic growth but also rapidly improve quality of life in urban centres across India.

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About the author

Harshita Agrawal

Harshita Agrawal is Senior Analyst at IDFC Institute, a Mumbai-based think/do tank. She holds a post-graduate degree in Economics and Public Policy from the Meghnad Desai Academy of Economics, and an undergraduate degree in Economics and Sociology from St. Xavier's College, Mumbai.

About the author

Pritika Hingorani

Pritika Hingorani is Director and Research Fellow at IDFC Institute, a Mumbai-based think/do tank. Pritika leads the Institute’s urban programmes. Previously, she worked at the IDFC Policy Group in Mumbai, and at Charles River Associates in Washington DC and London. She holds a Masters in City Planning from the Massachusetts Institute of Technology.

About the author

Harsh Vardhan Pachisia

Harsh Vardhan Pachisia is Senior Analyst at IDFC Institute, a Mumbai-based think/do tank. He holds a Bachelor of Science degree in Business and Political Economy from the Stern School of Business, New York University. He previously worked as an Economics Teaching Fellow at the NYU Stern School of Business.

About the author

Kadambari Shah

Kadambari Shah is Associate at IDFC Institute, a Mumbai-based think/do tank. She holds a post-graduate degree in Economics and Finance from the Meghnad Desai Academy of Economics, and an undergraduate degree in Economics, Literature, and Anthropology from St. Xavier’s College, Mumbai.

About the author

Sharmadha Srinivasan

Sharmadha works for a public policy think tank in Mumbai. She holds a Master’s degree from the University of Warwick and graduated from St.Xavier’s college. She previously worked at the Belgian Consulate and at Gateway House, a foreign policy think tank.

About the author

Vaidehi Tandel

Vaidehi Tandel is Junior Fellow at IDFC Institute, a Mumbai-based think/do tank. She holds a Ph.D. in Economics from the Department of Economics, University of Mumbai. She was a postdoctoral visiting scholar at Columbia University, New York.