For India, transitioning from a $2.3 trillion economy to a $30 trillion economy by 2047 will need an incremental $20 trillion in urban economic output. India’s urban transformation is both a challenge and an opportunity, finds out Rakesh Rao, during his conversation with Clara Cutajar, Global Capital Projects & Infrastructure Leader, PwC; Jennifer Tay, Asia Pacific Infrastructure Leader, PwC; and Mohammad Athar, Leader Capital Project PwC India.
India is all set to become $5 trillion economy very soon and aspires to reach $30 trillion by 2047. To fuel this economic growth, India needs a robust investment in infrastructure development. This is attracting investors from across the world. “Infrastructure is effectively at the heart of unlocking economic growth for this country, making it incredibly important. A lot of our international investors are looking at India as a significant investment opportunity,” said Clara Cutajar, Global Capital Projects & Infrastructure (CP&I) Leader, PwC, who was in Mumbai recently to attend 2024 PwC Global CP&I Leadership Meet.
She continued, “From a leadership perspective, the key areas we discussed (during the meet) included how we could facilitate private capital inflow into India and, more broadly, across the world. Additionally, we explored how PwC can help clients deliver capital projects more efficiently, effectively, on time, and within budget.”
One of the key topics of discussion in PwC meet was the application of generative AI and technology in delivering future infrastructure projects. Jennifer Tay, Asia Pacific Infrastructure Leader, PwC, stated, “The speed, transparency, and governance that technology can bring are crucial for infrastructure projects in India. This digital transformation is especially important to ensure timely delivery and accountability.”
Urbanisation drives growth
Economic growth signifies the rise in the value of goods and services produced by a nation or regional economy over a period. Often, urbanisation plays a key role in driving economic progress as cities are the primary hubs of global economic activity, contributing over 80 per cent of the world’s GDP.
According to Cutajar, fundamentally, cities are the core drivers of economic progress as they generate jobs and growth opportunities. However, for a city to function effectively, it needs robust infrastructure, with public transport being a key component for enabling people to move efficiently. “If people spend excessive time in traffic, their productivity decreases significantly. Addressing inefficiencies in transportation is crucial for reallocating time toward more functional and fruitful activities. Metros, for instance, are part of the solution, and Mumbai is undergoing a major transformation with the development of several metro lines. In Australia, we have addressed similar challenges by creating regional cities to lessen the burden on existing mega-cities. These new urban centers generate jobs and growth opportunities, supported by infrastructure like metros and airports,” she observed.
Indonesia is another example which has taken steps to significantly transform urban centers in the recent years. Tay explained, “Jakarta, the current capital, is highly congested and faces challenges like flooding due to inadequate drainage systems that were not designed with climate change in mind. Indonesia is addressing this by building a new capital in a less congested region. This initiative frees up space in Jakarta, enabling its transformation into a more sustainable urban center while modernising the country by creating a well-planned new capital.”
The government in India is also taking steps to reduce the burden on existing cities by creating more cities and urban centers to disperse the population and generate jobs around these new hubs. Mohammad Athar, Leader Capital Project PwC India, states, “Urbanisation is essential for economic growth. Estimates suggest that by 2047, India’s economic size will grow substantially. Globally, 70-80 per cent of GDP is generated in cities. For India, transitioning from a $2.3 trillion economy to a $30 trillion economy implies an incremental $20 trillion in urban economic output. This growth necessitates integrating peri-urban areas into city planning, as 60 per cent of new investments occur there. Effective regional-level planning, such as Tokyo’s integration with Osaka through high-speed rail, could inspire similar projects in India, like the Mumbai-Ahmedabad corridor. Such initiatives would decentralise economic activity and alleviate urban congestion.”
Assessing the Smart Cities Mission
With 100 cities leading the initiative, the Government of India’s Smart Cities Mission (SCM) – which has been extended till March 31, 2025 – has made significant progress, having completed 7,380 out of 8,075 projects, with an investment of Rs 1.48 trillion. These projects were aimed at creating smarter, more livable urban spaces for all.
Athar added, “India is urbanising rapidly, with several states now more than 50 per cent urbanised. While the Smart Cities Mission has enabled some progress, challenges persist. Cities vary greatly—from mega-cities like Mumbai to emerging metros like Indore and Jaipur, and smaller cities like Shimla and Kandla. Each has unique needs. Encouraging private capital in smaller cities and building local leadership capacity are crucial steps for balanced urban growth.”
The mission’s multiple objectives include integrating technology into infrastructure management. “While progress has been made—such as the establishment of command and control centers and intelligent transportation systems—there’s still room for improvement. A broader ‘Economic City’ program could focus on investments and additional key performance indicators. Importantly, leveraging private sector capital will be critical to enhancing the mission’s impact,” he said.
According to Jennifer Tay, the term ‘smart city’ needs rethinking. “In today’s context, every new city incorporates smart elements like data centers, fiber optics, and EV charging infrastructure. Therefore, all cities should inherently be ‘smart’ by design,” she stated.
Growing cities are facing multiple hurdles. Clara Cutajar elaborated, “Existing cities face numerous challenges, including traffic congestion, air pollution, and inadequate public transport. Educating communities about sustainable living and adopting changes in transportation habits is essential. Financing and maintaining public transport projects, particularly in complex urban environments, is another significant challenge.”
Mature cities like Singapore and Tokyo struggle with housing affordability and healthcare costs. For instance, aging populations in these cities burden healthcare systems. Developing affordable housing and ensuring access to quality healthcare are critical to sustaining liveability, believes Tay.
Transforming urban transportation
Urban development and transportation are inextricably connected, with transportation systems serving as a critical catalyst for a city’s growth and expansion. Mohammad Athar elaborated, “Globally, transport-led development precedes economic growth. For example, the Delhi-NCR region’s regional rail system will integrate cities like Gurgaon and Faridabad, alleviating pressure on Delhi. However, coordination among ministries and local governments remains a challenge, often delaying projects.”
Efficient transport systems, like metro, can foster economic activity, transform urban mobility, reduce road congestion, and make cities more attractive for economic investments. However, it is important for India to attract private investment in infrastructure by ensuring a reasonable return on investment (ROI) for private investors. Athar said, “It’s crucial to identify assets suitable for private investment and create pathways for their involvement. For assets with insufficient ROI, government subsidies or ownership might be necessary. For example, India’s electric bus PPP model guarantees per-kilometer revenue, attracting private sector participation.”
Ensuring consistency in policy framing process will have a long-term impact on the investors. “Investors can price risks if frameworks are predictable. Recent measures like the Payment Security Mechanism for PPP projects enhance investor confidence by addressing cash flow uncertainties,” explained Jennifer Tay.
Adopting best global practices
As India gears to develop its city infrastructure, urban planners can learn a lot from global success stories. “Globally, practices like congestion pricing in Singapore and integrated public transport planning can inspire India. Conversely, India’s approach to fostering innovation and addressing challenges in diverse urban settings can offer valuable lessons to the world,” opined Tay.
According to Clara Cutajar, “India’s entrepreneurial spirit and capacity for innovation are exemplary. Testing and scaling innovations domestically before exporting them globally is a unique strength.”
While India’s robust frameworks in sectors like airports and renewable energy are worth emulating by urban planners globally, India needs to have more policy clarity in emerging areas like green hydrogen and alternative mobility to attract investments. It is also important for a large growing economy like India to focus on developing sustainable infrastructure in cities. She explained, “Encouraging public transport usage and integrating peri-urban developments are essential. Adaptation is equally important—existing infrastructure must be upgraded to meet sustainability goals, rather than solely focusing on new developments.”
Public and private sector collaboration will also be crucial for sustainable development. “Policies should incentivise investments in sustainability while addressing existing inefficiencies. Energy efficiency and climate adaptation must be central to infrastructure planning,” opined Mohammad Athar.
In conclusion, India’s urban transformation is both a challenge and an opportunity. With strategic planning, robust policy frameworks, and global collaboration, India can harness its urban potential to drive sustainable economic growth.
-Rakesh Rao