Date: 13/04/2023

Relevance: GS-1: Urbanization and Related issues.

Relevance: GS-3: Climate Change and its adverse impacts; Disaster Management.

Key Phrases: Disaster-proof Cities, Urban development, World Bank, 74th constitutional Amendment, Sustainable Housing, Funding Gap, Private Investment, City Governance, Policy paralysis from the Top, International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA).

Context:

• According to the EY forecast, India is expected to be a $26 trillion economy (in market exchange terms) by 2047.
  • The per capita income is expected to increase to $15,000, putting the country among the ranks of developed economies.
  • However, to become a global economic powerhouse, several actions need to be taken.
• One of the critical concerns is the urbanization process underway in India.

Key Highlights:

• The number of inhabitants in Indian cities is estimated to have increased almost fourfold between 1970 and 2018, from 109 million to 460 million.
• The country is expected to add another 416 million people to its cities by 2050 and has an urban share of population of 50 per cent.
  • This is likely to put additional pressure on the already stretched urban infrastructure and services of Indian cities – with more demand for clean drinking water, reliable power supply, efficient and safe road transport amongst others.
• Cities in India occupy just 3 percent of the nation’s land, but their contribution to GDP is a massive 60 per cent.
• Many Indian metros are not meeting their potential in serving as engines of economic growth and job creation.

Need for making Cities disaster-proof:

• While many important steps have been taken by the government, one aspect that is completely left out from our city planning is to make the cities cope with climate risk.
• IPCC projections suggest that the events like extreme precipitation are bound to happen more frequently with climate change.
• The planning for the cities without factoring this may be too costly.
  • For example, Mumbai experienced unprecedented flooding in 2005, causing direct economic damages estimated at almost $2 billion and 500 fatalities as per the study, ‘An assessment of the potential impact of climate change’, published in a climate journal.
  • The findings suggest that by the 2080s an ‘upper bound’ climate scenario could see the likelihood of a 2005-like event more than double.
  • The estimate states that total losses (direct plus indirect) associated with a 1-in-100 year event could triple compared with the current situation (to $690-1,890 million), due to climate change alone.
• The analysis also demonstrates that adaptation could significantly reduce future losses.
  • For example, estimates suggest that by improving the drainage system in Mumbai, losses associated with a 1-in-100 year flood event today could be reduced by as much as 70 per cent.
• Similar catastrophic events, though on a lower scale, were seen recently in cities like Chennai, Gurugram and Bengaluru.
  • However, city planners do not seem to have learnt the lesson.

Other Issues with the Urbanization

• Huge Gap in the Funding for Urban Infrastructure :
  • Currently, the central and state governments finance over 75 percent of city infrastructure, while urban local bodies (ULB) finance 15 percent through their own surplus revenues.
    • Only 5 percent of the infrastructure needs of Indian cities are currently being financed through private sources.
  • The World Bank’s report “Financing India’s Urban Infrastructure Needs: Constraints to Commercial Financing and Prospects for Policy Action” estimates that India will need to invest $840 billion over the next 15 years—or an average of $55 billion per annum—into urban infrastructure whereas the flagship programmes of the government, the Smart City mission, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), the Pradhan Mantri Awas Yojana (PMAY), etc., are not more than ₹2 lakh crore (that too for a period of five years).
• Fragmentation of Responsibilities and Limited Ownership of Economic Initiatives :
  • Cities primarily are run by parastatals and the city governments hardly have any role to play in the smooth functioning of such parastatals.
• Lack of Business- and Investment-friendly initiatives and Regulations :
  • A weak regulatory environment and weak revenue collection add to the challenge of cities accessing more private financing.
    • Between 2011 and 2018, urban property tax stood at 0.15 percent of GDP compared to an average of 0.3-0.6 percent of GDP for low- and middle-income countries.
  • Low service charges for municipal services also undermines their financial viability and attractiveness to private investment.

Way Forward:

• AI based modeling can be the right approach to build scenarios for the medium, long term on these aspects.
  • These may be linked to a city based economic model to quantify the likely cost in the event of occurrence of climate-led disaster in a megacity.
  • An upfront number incorporating all aspects of cost is an important component of an adaptation assessment plan as policymakers could visualize the potential cost of no-action.
• There is a need for expanding the capacities of city agencies to deliver infrastructure projects at scale.
  • Currently, the 10 largest ULBs were able to spend only two-thirds of their total capital budget over three recent fiscal years.
• Over the medium term, the report suggests a series of structural reforms including those in the taxation policy and fiscal transfer system - which can allow cities to leverage more private financing.
• In the national task force that reviewed the 74th Constitutional Amendment, chaired by K.C. Sivaramakrishnan, many suggestions were made such as:
  • Empowering the people
  • Transferring subjects to the city governments
  • Suggesting that 10% of the income-tax collected from cities be given back to them ensuring that this corpus fund was utilized only for infrastructure building.

Conclusion:

• Planning for mega cities needs to incorporate: assessment of current and future rainfall patterns in megacities; urban flood model/storm water management model; and spatial distribution of people/property and insurance penetration.

Source: The Hindu BL

Mains Question:

Q. What are the critical concerns in the urbanization process underway in India? Also, suggest measures to overcome these challenges. (250 Words).