Financing India's Urban Infrastructure (21 November 2022)
The World Bank has produced a paper titled "Financing India's Urban Infrastructure Needs: Constraints to Commercial Financing and Prospects for Policy Action."
The research emphasizes the critical importance of leveraging additional private and commercial investments to close increasing financial disparities.
What are the Report's Highlights?
If India wants to satisfy its rapidly rising urban population's demands, it would need to invest USD 840 billion in urban infrastructure over the next 15 years.
People who live in cities:
By 2036, 600 million Indians, or 40% of the population, will live in urban areas.
This is anticipated to place extra strain on India's already overburdened urban infrastructure and services, with increased demand for clean drinking water, dependable electricity supply, and efficient and safe road transportation, among other things.
The national and state governments fund more than 75% of municipal infrastructure, with Urban Local Bodies (ULBs) funding the remaining 15% with their surplus income.
Only 5% of Indian cities' infrastructure requirements are funded by private means.
Slow Implementation of the Centre's Signature Urban Missions:
Due to limits on implementation capability at the city level, states and Urban Local Bodies (ULBs) have also been delayed in implementing some of the Centre's key Urban Missions, such as the Smart Cities Mission (SCM) and the Pradhan Mantri Awas Yojana (PMAY).
Over the previous six fiscal years, ULBs in India have only completed roughly one-fifth of the total cost or expenditure of approved projects under SCM and (the Atal Mission for Rejuvenation and Urban Transformation (AMRUT).
PPP transactions for urban infrastructure include the following:
Public-private partnership (PPP) transactions for urban infrastructure in India have declined significantly in the recent decade, both in terms of monetary value and transaction volume—124 PPP projects totalling USD5.5 billion have been granted in the urban sector since 2000.
Meanwhile, PPP project awards had fallen significantly following a "short but significant rise" between 2007 and 2012, when most of these contracts were granted. Only one-third of all PPP investments approved since 2000 have occurred in the recent decade, with 55 projects totalling USD 17 billion.
What are the recommendations?
It is proposed that city agencies enhance their capacity to implement large-scale infrastructure projects.
Over the last three fiscal years, the ten largest ULBs were only able to spend two-thirds of their total capital expenditure.
The research offers a variety of structural adjustments in the medium term, including those in taxation policy and the fiscal transfer system.
It may enable cities to access more private finance.
It suggested formula-based and unconditional funding transfers to cities, as well as gradually extending the responsibilities of local agencies.
Urbanization refers to the population transfer from rural to urban regions, the associated decrease in the number of people living in rural areas, and how societies adjust to this change.
Natural Population Growth: -
This occurs when the number of births exceeds the number of deaths.
Rural-to-urban migration: -
It is influenced by pull factors (that draw people to cities) and push forces (those that drive people away from the rural areas).
The key draw factors are job possibilities, educational institutions, and the metropolitan lifestyle.
The primary push factors include poor living circumstances, a lack of educational and economic possibilities, and inadequate healthcare facilities.
Northern America (with 83% of its inhabitants living in urban areas as of 2022), Latin America and the Caribbean (81%), Europe (75%), and Oceania (67%) are the most urbanized regions.
Asia's urbanization rate is at around 52%.
Africa is still primarily rural, with only 44% of the people residing in cities.
India's Urbanization Initiatives:
Urban Development Schemes/Programs:
Pradhan Mantri Awas Yojana-Urban
Swachh Bharat Mission-Urban
Government Initiatives for Slum Dwellers/Urban Poor:
Atmanirbhar Bharat Abhiyan (self-reliant India)
Pradhan Mantri Garib Kalyan Yojana