OPINION: There should be continued focus on building urban infrastructure and sustainable smart cities

By Debashish Biswas

India’s urban population is expected to grow from 377 million in 2011 (31% of total population) to around 600 million or 42% of the total population in 2030. It is estimated that in 2030, for five states – Tamil Nadu, Gujarat, Maharashtra, Karnataka and Punjab, urbanisation levels will be more than 50% (Sources: Census of India 2011, McKinsey Global Institute and UN World Urbanisation Prospects 2018). Indian cities will act as the engines of growth for the economy.

As highlighted in the National Infrastructure Pipeline, an estimated ₹19,19,267 crores capital expenditure is estimated between FY20-FY25 in urban infrastructure (Source: National Infrastructure Pipeline, Volume 1). Around 21% of this capital expenditure is proposed to be funded through private sector participation.

Given this, as part of Budget 2022-23, it is expected that urban sector development will continue to remain as one of the major focus areas. Budgetary allocations are expected to be made for:

• Strengthening core urban infrastructure – Continued investments to reinforce core urban infrastructure like water supply, solid waste management, urban mobility, among others. Recently, in October 2021, Ministry of Housing and Urban Affairs announced AMRUT 2.0 which focuses on enhancing water connections in around 4800 urban local bodies, sewerage/ septage services in 500 cities as well as rejuvenation of water bodies, green spaces and parks (Source: AMRUT 2.0 guidelines). Further, Swachh Bharat Mission-Urban 2.0 was also announced in October 2021 with the aspiration of making all cities garbage free.
• Housing to remain a key focus area – Housing, specially providing affordable housing for all, remains a key priority for the country. It is also important to provide necessary incentives and improve various regulatory processes to attract private investments in the housing sector, especially in affordable housing.
• Developing smart digital infrastructure in terms of mobility management, digital service delivery, city management, safety and security, environmental management, etc. Emphasis may be provided on creating specific digital urban solutions leveraging the data being captured at the city level, specifically in the smart cities where the command control centers are already operational. Also, focus may be provided in creating cloud based shared digital infrastructure at state as well as district level so that even the smaller urban local bodies may get access and leverage digital infrastructure.
• Environment and sustainability focus: Given the focus of building environmentally friendly and resilient cities, the budget may provide specific emphasis on developing sustainable urban areas including increasing green cover, urban forest, water conservation, water recycling, waste reuse, renewable energy usage, energy conservation, etc. On the mobility front, focus may be provided on further developing non-motorized transportation and electric vehicle infrastructure. For facilitating developing environmentally friendly infrastructure, necessary policies and incentives may be considered. Funding available under CSR activities may be leveraged for implementing various environmentally friendly infrastructure at city level.
• Continue municipal reforms: To enable urban infrastructure growth, the ongoing municipal reforms should continue. These include -- a) strengthening municipal bond market – key steps to be undertaken by the urban local bodies are improving financial discipline; accounting reforms; improved governance and augment own source revenues; b) asset monetization and attracting private sector – creating an environment for attracting more private investments; and c) enabling user charges for funding urban infrastructure. Additional incentives may be provided to urban local bodies which undertake such overall reforms proactively.

Overall, like last year, the current pandemic calls for a public investment led push for enabling economic growth. The FY 22-23 budget needs to focus on increased spending in overall urban infrastructure & capital assets, which are likely to have a multiplier effect on demand generation and gross domestic product (GDP) growth. Further, higher urban infrastructure spend will improve investment attractiveness, create more employment opportunities and enhance quality of life.

Debashish Biswas is Partner with Deloitte Touche Tohmatsu India LLP

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