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India's urbanisation challenge

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Securing inclusive and resilient economic growth in India's cities

India is urbanising quickly. Around 34% of Indians now live in cities, compared to only 18% in 1960. Although the rate of urban growth in India has been fairly slow to date, it is now starting to accelerate and this creates numerous, critical challenges for India’s cities. These cities are the source, potentially, of much greater and more productive economic activity, yet are clearly dragged down by chronic problems of extreme inequality, poor and overloaded infrastructure, and very inconsistent public service delivery.

Growing urban population

According to the World Bank, 65.5 million Indians live in urban slums and 13.7% of the urban population live below the national poverty line. In major cities such Delhi, Mumbai, Hyderabad, and Kolkata, population growth has been fastest on their peripheries, often in areas beyond official administrative boundaries. This presents some awkward problems in accurately measuring the rate of ‘real’ urban population growth and further exacerbates difficulties in servicing the needs of a city’s growing population with decent social and economic infrastructure.

OPM has a substantial presence in India and I have been able to spend a decent amount of time there myself, seeing at first hand the challenges the country’s cities face in attempting to create a new basis for more resilient, inclusive, and productive economic growth. A series of very enlightening discussions with key observers from the World Bank, Asian Development Bank, the National Institute of Urban Affairs, and the Indian Council for Research on International Economic Relations, as well as a number of major corporate  and infrastructure players, have provided some striking insights into the multifaceted challenges that need to be addressed.

Priorities and absorption

Interestingly, the problem is not really a lack of finance. There are various sources of funding available for urban infrastructure, service development, and other much-needed interventions. The main problem is actually one of ‘absorption’ i.e. being able to divert this money properly into bankable, needs-based projects and then put in place effective delivery mechanisms. The underlying issue here of course is one of institutional capability and the efficiency of existing governance procedures. It is certainly possible to design both economic and social policy interventions, but the challenges around their implementation and then a full realisation of intended outcomes remain very pressing.

A number of key areas are repeatedly mentioned as priority needs including:

  • affordable housing;
  • clean water supply and use, as well as associated sanitation measures to improve health;
  • transport access, especially last mile connectivity;
  • solid waste management;
  • dependable urban energy; and
  • job creation and skills development.

However, the issue that tends to present itself more frequently than the others is a wider concern about every city’s ability to create new infrastructure that is truly climate resilient. 

Urban climate resilience

Indian cities already witness ongoing climate-related shocks and disasters and these have a tremendous economic cost. There is an ongoing need to fully understand the costs of investing in physical resilience, versus the benefits that accrue in terms of reducing economic - and social - losses. Coastal cities - many of which, such as Mumbai, continue to grow quickly - are obviously at particular risk. It is unclear how far a proper strategic approach is being designed to support these cities to continue operating physically, economically and socially, under more challenging climactic conditions.

Not only the planning and location of infrastructure, but also of the siting of new industrial development and residential dwellings are key to this. There are already many policies and strategies targeting specific locations for industrial development (often not quite close enough to major population centres and labour markets), but a failure to appreciate that some of these locations in the future will never be able to supply sufficient water for industrial activity will result in the wrong places being selected for growth.

Economic resilience

Furthermore, in the context of urban resilience, it is unclear how far the thinking really extends to a proper understanding of ‘economic’ resilience. In the face of climate and other related shocks, how do urban economies continue to function? How does a city’s various industry sectors - formal and informal - continue to operate and how will supply chains, product markets and feedstocks be affected by different forms of shocks? Growing populations need new jobs and how will these be created in a high climate-risk context? And the various shocks could be concurrent and simultaneous; climate-related disaster plus population displacement creating even larger informal settlements on the periphery of cities that already suffer chronic infrastructure deficits. The ‘city systems’ thinking isn’t fully developed here, but needs to be.

The issue is again one of urban-level capacity - the ability of a growing city to plan strategically for both physical and non-physical change, and then to deploy resources easily into critical projects. Accurate measurement of the impact of investments in infrastructure resilience, for example, would help policymakers and implementers understand where positive change is being achieved and value for money secured. Currently, urban change in India is managed and directed mainly from either national or state level. Arguably, this structure doesn’t properly understand the true nature of an ‘agglomerated’ urban economy, which may be spread over separate jurisdictions, with both competing and overlapping service remits. There are a variety of national and international funding streams that could help respond to resilience needs, but not necessarily the right structure at the urban level for this money to drop into.

Some form of devolved, decentralised control of urban economies would help, not only with strategic economic and physical planning, but also with financing and delivery. This would enable a better understanding of, and planning for, key nodal points and industrial, economic centres. The national government has already set out substantial plans for major economic corridor routes including the Vizag-Chennai industrial corridor and the Delhi-Mumbai equivalent. These are extremely long routes across the country and it is unclear how far the most appropriate nodal points have been selected for economic growth and intensification – with a view to securing much needed improvements in job creation, industrial specialisation, productivity enhancement, and longer-term economic and social inclusion. Building into this process the need for climate-resilient economic growth – not to mention affordable housing - in the right locations, creates a very complex series of economic and structural challenges.  

Smart cities

Much has been made of the Government of India’s Smart Cities Mission as a key component in addressing the various weaknesses and challenges of India’s urban system. Some commentators, though, question how far this mission is really a strategic response to urban weaknesses, as opposed to simply a series of rather uncoordinated demonstrator projects.

There are always huge definitional problems when it comes to the ‘smart’ element of any city. However, in India, a smart city would surely be one that has clean water for every household, access to basic health, sanitation, and social services, housing that is both safe and affordable, and access to at least one decent formal-economy job per family that provides some kind of basis for economic progression. In some cities, a smart intervention might even include something as simple as decent pavements; unfortunately, these are lacking in many of the country’s urban areas.

There has been tremendous enthusiasm demonstrated in some cities for the pursuit of advanced, smart technology as a way to improve quality of life for the majority. What seems to be missing, however, is any systematic means of assessing the impact of these interventions in the round – are cities actually better off than they would have been in the absence of the drive for ‘smartness’? If the government had instead concentrated only on the organisational capabilities of urban civil servants, for example? Might that have had a greater impact? At the current time, we don’t know, as the forms of evaluation conducted don’t yet seem to provide the whole story.

As India’s cities continue to grow in the face of weak infrastructure and limited urban governance capacity, it remains to be seen how the country overall can achieve its ultimate social and economic aims. The promise of India - the huge economic advancement that comes from deploying a massive, well-educated, highly skilled young workforce into the industries and technologies of the future –  seems a way off yet. A big part of this is probably around organisation and coordination and simply making existing structures work more efficiently. The money is there, as well as the brainpower, but the system that coordinates them needs to be much stronger to realise India’s full potential.

Oxford Policy Management provides a range of services to support the resilient and inclusive economic growth of cities around the world. These services are available from both our Oxford and Delhi offices.

Contact jim.coleman@opml.co.uk or divya.sharma@opml.co.uk