World Bank Report on Urban Financing

Why in news?

A recent report on urban financing for India is another case of a top down approach that is over dependent on technocentric solutions and capital-intensive technologies.

What is the case of urbanization in India?

• Urbanization - Urbanization is the increase in the proportion of people living in towns and cities.
• Urbanization occurs because people move from rural areas to urban areas (towns and cities).
• Trend in India - In 2021, approximately a third of the total population in India lived in cities.
• Major causes of urbanization
  • Industrialization
  • Commercialization
  • Better services in urban areas
  • High standard of living
  • Ample employment opportunities
  • Modernization
  • Rural-urban transformation

What are the findings of the World Bank report?

• Focus area - The World Bank report focuses on private investments ameliorating urban problems.
• Source of urban finance - After three decades of reforms, urban finance predominantly comes from the government.
• Of the finances needed to fund urban capital expenditures, 48%, 24% and 15% are derived from the central, State, and city governments, respectively.
• Public-private partnership projects contribute 3%.
• Government revenue - The report points out that nearly 85% of government revenue is from the cities.
• WB estimates - The World Bank (WB) estimates that nearly Rs 70 lakh crore would be needed for investment in urban India to meet the growing demands of the population.
• Suggestion - The solutions suggested include improving the fiscal base and creditworthiness of the Indian cities by enhancing the tax base.

What are the issues?

• Demand and supply gap - Matching the gap between demand and supply is a major challenge.
• The flagship programmes such as the Smart City mission, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), the Pradhan Mantri Awas Yojana (PMAY), etc., are not more than Rs. 2 lakh crore.
• Skepticism in enhancing the tax base - Meeting the rising demands of urban infrastructure in the cities even by enhancing the tax base remains skeptical.
• Top to bottom approach - The basic problem with this report is that it is made using a top to bottom approach, with too much of a focus on technocentric solutions.

What is the need of the hour?

• Plans must be made from below by engaging with the people and identifying their needs.
• The city governments and the people need to be empowered.
• The recommendations of the national task force that reviewed the 74th Constitutional Amendment, chaired by K.C. Sivaramakrishnan can be implanted. It includes
  • Empowering the people
  • Transferring subjects to the city governments
  • 10% of the income-tax collected from cities be given back to them
  • Ensuring that this corpus fund was utilised only for infrastructure building

• Regular elections should be held in cities and there must be empowerment through the transferring of the three Fs: finances, functions, and functionaries.

The 74th Amendment Act of 1992 provides a basic framework of decentralisation of powers and authorities to the Municipal bodies at different levels.

Reference

1. The Hindu | A reminder of the flaws in India’s urbanisation policies