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India is urbanising at a rapid pace with urban population rising at a much faster rate than its total population. The level of urbanisation has increased from 17 per cent in 1951 to 31 per cent in 2011.
The urban population in India, which was nearly 377 million in 2011, is poised to grow to 600 million by 2031. Urban areas contribute 62-63 per cent of India's gross domestic product (GDP), which is estimated to reach 75 per cent by 2030.
According to the UN 2018 Revision of World Urbanization Prospects, India’s urbanisation will reach 37-38 per cent in 2025 and the urban sector will start superseding the rural sector from 2045-46 onwards.
It also projects that India will experience a huge increase in urban population in the coming years, concentrated mainly in the million-plus cities. These cities will have to act as economic power centres attracting and facilitating investments.
Cities will grow and some of our urban agglomerations will grow even faster. Quality of infrastructure and services will be a crucial determinant of the cities to leverage agglomeration economies. Ease of Living is and will remain as important as Ease of Doing Business.
Without focussed attention, our urbanisation has been chaotic in nature resulting in the perils of “Urban Sprawl”.
Poor roads, sanitation
Our cities suffer from choked roads, insufficient water supply, sanitation and solid-waste management, lack of schools, health centres, and recreational areas such as parks and playgrounds.
A large section of our urban population lives in slums. Integrated and coordinated governance across an urban agglomeration is critical for civic amenities such as reducing air pollution and urban flooding.
With insufficient progress on both these fronts, severe spatial and functional fragmentation remains in the governance of our urban agglomerations. The need of the hour is to integrate community-based organisations, practitioners, urban local bodies, state/union territory (UT) governments, central government ministries/departments/agencies and all other stakeholders involved in the development of the city, to understand Transit Oriented Development(TOD), its benefits and implementation strategy.
An integration of TOD along with flexible FSI norms will lead to higher population and job density as compared to the area around and beyond the influence areas.
There is a need for mixed land use and compact city norms, observing the international scenario and national resource availability, to identify norms for sustainable density norms (range) for different scales of cities.
According to the National Clean Air Programme, data generated over the years reveal that particulate matters (PM10 and PM2.5) exceed the permissible levels at many locations, particularly in urban areas.
Development of green buildings, as per the norms suggested by the Ministry of Environment Forest and Climate Change along with GRIHA guidelines, should be encouraged.
Faster Adoption and Manufacturing of Electric Vehicles (FAME) guidelines need to be promoted with a network of charging infrastructure to be installed across all million-plus cities, smart cities, state capitals and major highways connecting major cities.
Fiscal empowerment of urban local bodies are key to solving urban issues in India. In countries such as Canada, the UK and the US, property tax collections, at about 3 per cent of their GDP, form the bedrock of local bodies’ revenues.
Property tax collection in India remains inadequate, averaging at just 0.2 per cent of GDP. This compares unfavourably to OECD as well as other BRICS countries, too.
Undervaluation, incomplete registers, policy inadequacy, and inaccurate property tax rolls are some factors for low property tax collection in India. Though setting up Property Tax Boards was advocated by the Thirteenth Finance Commission, so far only a few have come into place.
Land value tax
Larger municipal corporations should directly explore the issuance of municipal bonds as a source of finance.
Land value tax can be used as a value capture tool, which apart from capturing any value increment, helps stabilise property prices, discourage speculative investments and is considered to be most efficient among all value capture methods.
Maharashtra and Tamil Nadu, through State laws, have expanded the scope of this mechanism to cover urban land also. Globally, land value tax is widely used in Denmark, Australia and New Zealand. There is a need for guiding and supporting States to undertake more such development initiatives.
Impact fee
Development charge (impact fee) — a market linked area based charge — is the most widely used land based fiscal tool in States.
States like Andhra Pradesh, Gujarat, Maharashtra, Tamil Nadu and Madhya Pradesh levy impact fee and collect it upfront while granting development permission. This can serve as an important revenue-generating tool especially in the newer developing townships.
A policy nudge to make ‘cities’ more liveable can create long-term sustainable ecosystem.
Aditi is an Indian Economic Service officer, working as Deputy Director in the Ministry of Finance, and Subhrasil is a research scholar at IIT Delhi. The views are personal
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