Anand Sahasranaman, “Financing the Development of Small and Medium Cities”, EPW, June 16, 2012, Vol. XLVII, No. 24
Urbanisation in India is currently marked by two fundamental trends:
(a) lopsided migration to the larger cities and
(b) unbalanced regional economic development.
A cause for major concern in India is that rural migrants have been bypassing small and medium towns and settling in the large cities. In this context, there is a need for the concerted development of small and medium cities as the key focus in the strategy to ensure sustainable urbanisation in India.
Small and medium cities hold the key because:
- These cities already have pre-existing economic bases, infrastructure and service delivery mechanisms and governance structures, no matter how insufficient.
- They have evolved 'soft' ingredients such as culture and community that are essential for the make-up of any city.
- Well-planned development of these cities can help disperse rural migration and prevent over-crowding of other metropolitan centres.
- Developing small and medium cities will address the problem of unbalanced regional growth.
To develop these cities, it is first necessary to understand their current status:
- Between1987 to 2000, the ratio of urban population in cities with greater than one million people went up from 18.2% to 25.9%, while that of cities with less than one million went down from 81.8% to 74%. (Himashu, 2008)
- There is an inverse relationship between poverty rates and the size of towns, with the poverty rate in large (one million plus) cities at 14.2% and in small cities at 24.2% in 1999-2000. (Kundu and Sarangi, 2005).
- Small and medium cities are nowhere as attractive as the larger cities for manufacturing companies looking to set up new units.
- Low quality of infrastructure and service delivery. For example, in 1999 the per capita domestic water supply in Class II cities was 69 litres per capita per day (lpcd), as against 148 lpcd in metropolitan cities.
- Lack of access to institutional funds. Eg: over 50% of funding from Housing and Urban Development Corporation (HUDCO) had been directed towards large cities, even when one of the stated objectives of HUDCO was to bridge the gap in access to infrastructure funding between small and large cities.
- Although the 74th Constitutional Amendment Act provided for setting up of District Planning Units and Municipal Planning Committees, their ground-level performance is unsatisfactory. Eg: while 10 states had constituted DPCs, only Kerala was found to have active and functional DPCs. (Mathur 2007).
The way forward:
- A comprehensive approach that addresses economic development along with infrastructure provision and service delivery is essential to ensure the sustainable development of small and medium cities. Addressing one of these components without attention to other can lead to unsatisfactory, suboptimal outcomes for these cities.
- Yet another aspect that needs to be reassessed is the current planning paradigm in India. Rural India and urban India are looked upon as two separate entities with their own independent sets of issues that need to be addressed by separate interventions. However, smaller cities are tied to their rural hinterlands in very fundamental ways and the development of these cities hinges upon the development of the surrounding hinterland. eg: flow of agricultural produce from rural areas to towns, and flow of manufactured goods in the opposite direction. Smaller cities can support agriculture-related industry and market.
- Incentivise the performance of District Planning Committees by linking their performance to the Grants received by the State governments.
- Develop land-banks in small and medium cities. This will not only provide land for infrastructure and economic activity as and when required. But will also allow the local governments to capture increases in land values (which will occur with improved infrastructure).
- Financing infrastructure creation through debt-financing, grant-funding etc. Refer to the Isher Ahluwalia Committee Recommendations on Financing Urbanisation
- An adjunct to the development of small and medium cities will be the development of new nodal cities. The creation of new nodal cities is driven primarily by the need to decongest existing cities and for the development of industrial clusters.While new cities need to be developed in India, their creation must be predicated on a clear overarching vision and a robust rationale. This is because the creation of new cities will require very substantial ﬁnancial outlays over long time periods. Therefore, new cities by themselves are not an answer to the urbanization challenges facing India; however, as an adjunct to the main strategy around small and medium city development, they can serve as a lever to direct future urbanisation.
Some common-place introductory points:
The urban population of India is concentrated in large cities. More than 60% of the urban population lived in Class I cities as of 2001. Chattopadhyay (2008) points out that the rate of population growth in these Class I cities has also been consistently increasing over the past ﬁve decades, from 45% in 1961-71 to 62% in 1991-2001. This has been accompanied by a decrease in population growth in smaller urban centres. This trend of migration towards the larger cities is due, in large part, to the economic prominence of these cities. These cities are the engines of economic growth, but are plagued by severe challenges to their civic infrastructure and service delivery capabilities. For this reason, they are deemed to be at the forefront of the urban challenge today.
India is rapidly urbanising and the rate of urbanisation is expected to climb steeply over the next few decades. McK insey Global Institute (2010) predicts an urban population of 590 million by 2030, as compared to 340 million in 2008. For India to be more inclusive, it is imperative that both economic growth and urban population be more equitably distributed.