Futurespace

It is just as well that the Delhi-Mumbai Industrial Corridor, when completed, will include at least six new cities. A McKinsey Global Institute study says we need many more, and provides a reality check and chalks out the massive infrastructural requirements of future urban India. A report.

It took nearly 40 years for India's urban population to rise by 230 million (between 1971 and 2008). It may take only half that time to add another 250 million (between 2008 and 2030).
Released in April 2010, a McKinsey Global Institute report on “India's urban awakening-Building inclusive cities, sus­taining economic growth” predicts that India's urban population will soar to 590 million (or 40 per cent of total population) by 2030 from just 290 million in 2001 (28 per cent of total population). And this expansion is expected to happen at a spe­ed quite unlike anything the country has experienced ever since its independence.

The report estimates that cities will generate 70 per cent of net new jobs cre­ated up to 2030, contribute over 70 per cent of India's GDP and drive a near four-fold increase in per capita income across the nation. It further adds that the urban economy will provide 85 per cent of the total tax revenue and around 200 million who live in the proximity of India's 70 lar­gest cities will directly benefit.

Urbanisation by 2030, will spread out across India, impacting almost every state. Five large states, namely Tamil Nadu, Gujarat, Maharashtra, Karnataka and Punjab, will have more than 50 per cent of their population living in cities than in villages.

In the global context, the dimension of urbanisation in India will be immense. It will have 68 cities with a population of over one million persons, 13 cities with more than 4 million persons, and six meg­acities with population of 10 million and more, including Mumbai and Delhi. And these will be among the five largest cities in the world by 2030.

This rapid speed of urbanisation will exert tremendous pressure on the housing, infrastructure, healthcare, education and recreation facilities and also pose major managerial and policy challenges unpre­ce­dented in the economy. Mckinsey projects a need to build between 700 million to 900 million square meters of residential and commercial space per year- equivalent of adding more than two Mumbai or one Chicago every year. In transportation, India will have to add 19,000 to 25,000 km of road lanes and about 350 to 400 km of metros and subways every year.

Going by the current rate of invest­ment, life for the average city dweller in India would become a lot tougher. Water supply could drop from an average of 105 litres to just about 65 litres a day, with a large section of the population having no access to potable water. Cities would leave between 70 to 80 per cent of sewage untreated. While private car ownership will increase, the shortfall in transportation infrastructure would create urban gridlock – similar to the acute congestion that crip­pled some Latin American cities.

In per capita terms, cur­rent annual capital spending of $17 is only 14 per cent of China's $116 and 4 per cent of United Kingdom's $391. McKinsey estimate that India will need to invest $1.2 trillion (Rs 53.1 trillion) just in capital exp­enditure in its cities over the next 20 years, equivalent of $134 per capita per year.  That would be almost eight times the current spending and represents an increase in urban infrastructure spen­ding from an average 0.5 per cent of GDP now to two per cent annually.

Key Recommendations

Funding

• Spend $2.2 trillion in cities over the next 20 years, including $1.2 trillion in capital investments. This will be an eight-fold increase in spending from $17 per capita per year to $134
• Make Tier 1 and Tier 2 cities near self-sufficient (around 80 to 85 per cent) by monetising land assets, maximising property tax, recovering operating and maintenance costs through user cha­rges and pushing for greater leveraging of debt and private participation
• Create a sufficiently funded grant sys­tem from state and central governments by tripling annual JNNURM alloc­a­tion in the short term and sharing 18 to 20 per cent of GST with cities in the medium term
• Provide additional support to weaker Tier 3 and 4 cities from the central and state governments at $20 per cap­ita per year

Governance

• Devolution of real power to cities by implementing the full 74th Constit­utional Amendment
• Institutionalise metropolitan struc­tu­res for at least 20 urban agglomerations with multiple municipalities
• Modernise service delivery structures, including corporatisation of select mu­nicipal functions and leveraging tar­geted private sector participation
• Improve local government capacity by creating new city cadre and allowing lateral hires from the private sector
• Drive transparency and accountability in city government through city cha­rters, MoUs between mayors and age­ncies, and through a state-level urban regulator

Planning

• Devolve the planning function to lo­cal governments by empowering MPCs to create statutory metropolitan plans and transferring local urban planning power to municipalities
• Create well-resourced planning orga­ni­sation at metropolitan and mu­nicipal levels and innovate with latest plan­ning technologies and models
• Create tight execution and enforce­ment mechanisms for city plans with a transparent system for exemptions and sufficient public participation

Sectoral policies: Affordable housing

• Mandate 25 per cent area for affordable housing in new developments above one acre, with associated incentives
• Offer a basket of incentives (like addi­tional FAR of up to 1, capital grant, utilisation of 5 per cent incentive area for commercial use, interest rate sub­sidies and a favourable tax regime) to developers and state housing boards to trigger new affordable units and slum redevelopment
• Create flexible affordable housing solu­tions with 30 per cent rentals and 5 to 10 per cent dormitories
• Create a national mortgage guarantee fund to spur lending to low-income gr­oups with an initial corpus of Rs 1,500 crore and capital adequacy ratio of 12 to 15 per cent

Sectoral policies: Climate change mitigation

• Reduce vehicle emissions by nearly 100 million tonnes of CO2 or equi­valent through greater use of public transportation, improving vehicle effi­ciency, and use of electric vehicles
• Reduce emissions by nearly 300 mt of CO2 or equivalent by reducing energy consumption in build­ings, appliances, lamps and street lights.

Shape

• Renew Tier 1 cities through a subs­ta­n­tial new capital investment prog­ramme of $288 per capita annually. Preemptively shape the trajectory of the largest Tier 2 cities, through $133 per capita investments a year.
• Facilitate 20-25 new cities near the largest 20 metros by pro­viding adequate infrastructure such as water, electricity and transportation links
• Raise quality of life to at least a basic standard in smaller Tier 3 and 4 cities through minimum government sup­p­ort of $20 per capita per year
• Seed future urbanisation by building 19 transportation corridors linking Tier 1 and Tier 2 cities.