What India's cities should expect from the Union Budget 2024-25

We need to not only sustain, but also further increase investments in cities to make them liveable and to drive economic productivity, job creation, and growth

By Srikanth Viswanathan

Published: Jul 22, 2024 11:51:28 AM IST

Updated: Jul 22, 2024 12:01:20 PM IST

Labourers work on an under construction portion of the Coastal Road expressway along the Arabian Sea coastline of Mumbai. Image: Indranil Mukherjee / AFP

The Government of India has invested significantly in cities from 2015 onwards through flagship schemes and missions such as Swachh Bharat, Smart Cities, AMRUT (Atal Mission for Rejuvenation and Urban Transformation), and Pradhan Mantri Awas Yojana. If one were to also factor in the XV Finance Commission grants, there has been around 500 percent increase in allocations during 2009-2022. We need to not only sustain, but also further increase investments in cities to make them liveable and to drive economic productivity, job creation, and growth.

The primary responsibility to invest in India’s cities lies with state governments. But there is a need for enablers in terms of new and innovative models of public service delivery and financing. The union government could make specific catalytic investments to incubate such enablers. Here are a few ideas where the funding needs from the union government are low yet the returns for India, as a whole, could be manifold.

1. Municipal Infrastructure Pipeline

The Union Budget should incentivise the creation of a Municipal Infrastructure Pipeline, to complement the National Infrastructure Pipeline (NIP). The NIP is for large projects with an outlay of over Rs100 crore. We need a shelf of bankable, investible projects in our cities to unlock municipal borrowings and private sector participation. Given the challenges in our cities, there is no dearth of requirements. From housing to water supply, from stormwater drains to public transport, from sanitation to parks and playgrounds, and from footpaths to streetlights—we need infrastructure projects to improve the liveability and economic productivity of our cities.

In addition to grant funding, cities will need to raise private capital. Municipal bonds are currently feasible only for large cities. Aggregate issuances since the mid-90s are less than USD 2 billion. We need to first create a culture of credit in municipalities, beginning with plain-vanilla bank loans. A Municipal Infrastructure Pipeline will set in motion a virtuous credit cycle to finance urban infrastructure and services.

2. Public Land Inventory and Valuation

Governments own substantial land holdings in cities. The larger the city, the more valuable such land parcels are. Even in smaller cities, leaving aside the value, there is much to be gained through better utilisation of such land, whether as open spaces or health and wellness centres or other community spaces.

Today, we do not have an aggregate view of public landholdings in cities. They are fragmented across the municipality, state urban department, revenue department (which is likely to be the largest landlord), other state departments, defence, railways, and public sector enterprises. Further, we neither understand their current usage nor their current market value.

Land in cities is invaluable. We cannot afford to underutilise it. We need to know of its existence and understand its usage and value. Once market valued, such land holdings would serve as worthwhile collateral to raise municipal borrowings, besides serving the cause of city dwellers by being put to better public use. The cost of putting together such an inventory and valuing the same would be a small fraction of the public value it could unlock.

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3. National Mission for City Roads

Roads are the largest public spaces in India’s cities. They are not just movement corridors but facilitate eight pieces of networked infrastructure—power, water, stormwater, sewerage, gas, telecom, streetlighting, and traffic surveillance. They facilitate access to work for women and the urban poor, and freedom of movement and safety for children, the elderly, and the different abled.

While India has transformed its highways, our city roads are in a pathetic state. We need citizen-centric roads that are safe, walkable and durable, and not vehicle-centric roads. This needs best-in-class design, execution, and maintenance standards, and model tender documents. The union government should finance the development of such guidelines and standards for city roads, and allocate resources for, say, 1,000 km of world-class city roads as a pilot. The Tender S.U.R.E. model from Bengaluru or CM GRIDS from Uttar Pradesh are both useful models.

4. Municipal Capability Centres

India is the hub for Global Capability Centres, which offer a wide variety of services to global markets. Adapting that model for our cities would address multiple challenges simultaneously. We are confronted by poor infrastructure and services in our cities, accompanied by understaffing.

If we create Municipal Capability Centres (MCCs) that provide shared services for cities at a regional or district level, we would be able to address staffing and service levels, and create jobs which have a multiplier effect on the economy owing to their public character. These MCCs could offer back office services such as accounting, payments, and payroll (like the Income Tax Centralised Processing Centre) or front office citizen services for certificates, licenses, tax payments, identity cards, etc. (like Passport Seva Kendras or VfS for visa) or field services such as asset maintenance or tax collection or horticulture (like Urban Company). We could even have all-women centres at the district level, particularly for the 4,500 small cities with a population of less than one lakh. The XV Finance Commission had set aside Rs450 crore for this concept. The union government needs to give this idea greater traction through incentives for models.

These four asks would require modest outlays from the union government but can corral in greater amounts of private capital and create a multiplier effect in terms of social returns. The Municipal Infrastructure Pipeline and the Public Land Inventory will unleash far greater amounts of private capital and private sector participation. The National Mission for City Roads will save significant funds for the exchequer through savings in lifecycle costs, besides delivering best-in-class road quality. Municipal Capability Centres will better citizen services, lower costs, and improve tax collections.

Viksit Bharat 2047 is possible only when India’s cities are able to attract capital and talent, and drive economic productivity. To do this, cities need to be more liveable. This, in turn, will require higher and more innovative investments in public infrastructure and services.

(The writer is CEO, Janaagraha and executive director, Jana Urban Space Foundation)