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March 19, 2024

Indian Economy|Development Strategy

Empower our Cities

By Nitin Desai


Empower our cities

As the economy grows, city governance must become a central part of our long-term development strategy

Nitin Desai

How large is India’s urban population? According to the 13-year-old 2011 Census, the percentage of Indian population living in urban areas was 31 per cent based on the Census definition of urban areas. Nearly 4,000 of these settlements were outside the jurisdiction of a municipality, accounting for about 30 per cent of the urban population recorded in the 2011 Census.

Perhaps a part of the difference between the Census and Municipal urban areas may be connected with resource-oriented factories being set up near the natural resource source. Also, factories may be set up on the outskirts of municipalities because of the ease and economy of land acquisition in an adjoining rural area.This is reflected in the Annual Survey of Industries 2021-22 and the Periodic Labour Force Survey 2022-23, which show that around 40 per cent of workers in manufacturing are in rural areas.

The Census estimate has been questioned by analysts combining the Census population data with satellite information about settlements, landscape area, intensity of night lights, and so on. A recent estimate concluded that the urban population in 2011 was 43 per cent of the total and not 31 per cent as estimated in the Census. However, this estimate has not included the Census urbanisation criterion of non-agricultural activities, which must account for 75 per cent of male workers in urban areas. This has led to the estimate showing very high percentages of urban population in the Gangetic plain area (UP 55 per cent, Bihar 74 per cent, and West Bengal 69 per cent). This may be because of densely populated, closely clustered villages.

The underestimation in the Census may not be as large as the 12 per cent of the total population suggested in an alternative estimate. Now that we are about 13 years beyond 2011, the Census urban proportion will likely be around 37.5 per cent of a total population of 1,400 million. Allowing for some Census underestimation, a prudent guesstimate of the current urban population would be around 550 million.

The 550 million citizens of urban areas are partially disenfranchised. They rarely have a say in determining the management and development of the cities and towns in which they live, despite having electoral rights for a municipal council. Only a few of them have a council that is sufficiently independent fiscally to allow city dwellers to shape the activities of the municipality. It is the bureaucrat who is appointed as the head administrator and his counterparts in the state and central departments who really determine programmes for the management of cities. In Mumbai, many citizens will be able to name the municipal commissioner, but very few will know the name of the city mayor!

Urban development programmes continue to be set by Central and state ministries and are inevitably sectional like the Smart City project or the older National Urban Renewal Mission. They are as incomplete as a national development strategy being determined by international aid organisations, which tend to focus not on the totality of development but on specific sectoral initiatives.

The principle of subsidiarity requires that the responsibility for decision-making should be located at the level where it has the most impact. In the context of urban areas, this appropriate level of authority is the municipality for cities and towns. For this authority to be exercised effectively, municipalities must not be heavily dependent on authorities at the higher level for their financial requirements. Moreover, the governance modality of municipalities should be consistent with citizen’s engagement, which is the ultimate requirement of the principle of subsidiarity. To put it simply, empower municipalities, make them financially independent and democratise their functioning. All three requirements are missing at present in India.

This approach to urban area management can be seen in many developed countries. In New York City, for example, the elected mayor wields full control on city-level decisions, while the elected governor of New York State has little influence. Can we create this degree of empowerment for our large cities?

The first goal is, of course, the democratisation of city governance. An elected state government clearly holds political authority over cities that are primarily governed by bureaucrats. However, an elected municipality can be effective only if it is less dependent on discretionary support from a higher level of governance.

The key lies in greater fiscal independence. In 1992, the 73rd and 74th amendments to the Constitution were passed to give constitutional status to the third tier of governance, the elected rural and urban local authorities. Article 280 of the Constitution was amended to expand the duties of the Finance Commission (FC) to make recommendations on transferring additional funds in the Consolidated Fund of a state to supplement the resources of the panchayats and municipalities with grants, and this started from the 10th FC. The Thirteenth FC made the grants relatively unconditional and the Fifteenth FC raised the share of the third-tier of governance in the divisible pool of taxes to 3 per cent.

Can we go further and amend the Constitution to make cities with populations above 10 million as a tier that would directly receive a significant share of the divisible pool, rather than through transfer to states? Should we designate them as National Cities? Do note that the goods and services tax (GST) took away the right of cities to levy entertainment tax and entry tax (octroi). They retain the right to levy a property tax, and third-tier cities could be required to increase their property tax substantially beyond the present levels, which are rather low when compared to those in other developing countries.

The reality of the urban spread requires another administrative development to ensure effective cooperation between multiple municipal authorities in an integrated urban complex like Delhi, with Faridabad, Ghaziabad, Noida, Gurugram and Bahadurgarh, and Mumbai, with Navi Mumbai, Bhiwandi and Kalyan. These and similar related clusters need to be brought together both for planning and implementation through an established mechanism for cooperation.

The empowerment of city governance matters not just for the city, but also for national development whose future will involve technology development, export-oriented growth, digital services expansion and many other initiatives that will require a well-managed urban area large enough to attract highly- skilled personnel and forward-looking enterprises. More Bengalurues, to put it simply.

It will also require a re-orientation of municipal development planning to encompass not only local logistics and infrastructure, but also their integration with regional and national requirements. It must join in national growth planning, especially in the national climate management strategy. This involves significant actions in cities, including creating more green spaces in urban areas, implementing measures to cope with higher temperatures and greater climate uncertainty, and addressing the rising risks of ocean water rise and more frequent and intense storms. Above all, as the regional body that services residents, it must focus strongly on what draws villagers to cities, which is not only work but also better facilities for education, health, and culture.

As our economy grows, more and more Indians will be living in cities. Hence, empowering cities must become a central part of our long-term development strategy.

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