Budget 2022-23: Finance Minister’s endeavour towards strengthening cities?

By Soumyadip Chattopadhyay, Arjun Kumar*
India is urbanizing and projections are that by 2047, it will have half of its population in cities, though it might be a conservative estimate. The policy makers face a very difficult task of addressing two conflicting objectives – one relates to serving city population’s needs for basic services and the other one relates to infrastructural needs for making cities engines of economic growth. The impacts of the COVID-19 have been particularly severe in cities due to overcrowded housing, inadequate infrastructure and minimal services. The pandemic has also devasted informal livelihoods in urban areas. The Omicron driven third wave in India have witnessed less severe lockdown restriction and economic disruptions are likely to be limited. Window of opportunity is now to act to revive the economy with focus on harnessing the growth potential of the cities.
The distinctive focus of this year’s budget on orderly urban development appears, therefore, to be very promising. The honourable Finance Minister quite rightly bats for ‘a paradigm change’ in cities as the time for short-lived, piecemeal solutions is over. But it is the finer budgetary details of the resource allocation in urban programs coupled with broad policy guidelines that determine the nature and speed of paradigm change.

Budget 2022-23 & Urban Sector

The Finance Minister marked the Azadi ka Amrit Mahotsav and set the course for India@100. The Booster Budget seeks to put the Pandemic behind us and immense emphasis has been laid on the utilization of public capital expenditure to crowd-in private investment and employ the interlinkages between sectors and stakeholders to propel the economy.
Inequities in access to services in our cities affect every part of people’s lives – greater is the service divide, higher is the negative impact on productivity and prosperity of people. In order to reimagine the ‘cities into centres of sustainable living with opportunities for all, including women and youth’, service divides need to be bridged. The total Budget Estimate (BE) available for the urban development (Ministry of Housing and Urban Affairs (MoHUA)) has experienced an increase of 40 percent from Rs 54,581 crores in Financial Year (FY) 2021-22 to Rs 76,549 crore in FY 2022–23. Moreover, the Revised Estimate (RE) for FY 2021-22 was Rs 73,580 crores, far above than the BE, almost thirty-five percent. Essentially there has been marginal rise in allocation in BE 2022-23 as compared to 2021-22 RE figures. It should be noted that the Actual Estimate (AE) for FY 2020-21 was lower than the BE owing to the pandemic. Clearly, the urban sector has performed significantly in FY 2021-22 as compared to a dip in the lockdown affected FY 2020-21. The BE for 2022-23 is now almost double that of AE 2019-20, the pre pandemic year.
Since the beginning of the pandemic, the urban sector has focused enormously on infrastructure projects- mostly mass rapid transit system (MRTS) and metro projects- and thus on capital expenditure, which has also remained important in BE 2022-23 at 35 per cent of the total estimate. Nonetheless, the revenue expenditure in RE 2021-22 and BE 2022-23 has witnessed a significant increase. The revenue expenditure in BE 2022-23 at Rs 49,208 crore is more than the total AE in 2020-21. Thereby, indicating an acceleration in urban projects delivery after the pandemic setback in FY 2020-21 in both capital expenditure and centrally sponsored schemes.

Urban Rejuvenation Missions

The trends in budgetary allocation for the two flagship schemes – Swachh Bharat Mission and Jal Jeevan Mission (Urban) cause some discomfort and might stymie the government’s initiatives to improve the coverage of water, sanitation and waste services. The BE outlay for SBM for the FY 2022-23 was Rs 2,300 crore, the same as that of FY 2021-22 (RE for FY 2021-22 was Rs 2,000 crores). The AE for FY 2020-21 for SBM was Rs 995 crore. The Jal Jeevan Mission (Urban), with a budgetary provision of Rs 2,87,000 crore for five years, plans to provide 2.87 crore tap-water connections in 4,378 statutory towns and liquid waste management in 500 Atal Mission for Rejuvenation and Urban Transformation (AMRUT) cities. However, there was no provision in budget 2022-23.
Moreover, the urban rejuvenation missions- Smart Cities Mission (SCM) and AMRUT has witnessed a marginal rise in budgetary allocations – the BE outlay was Rs 14,100 crore for the FY 2022-23, which was marginally higher from Rs 13,750 crore in FY 2021-22. In particular, there has been no change in the budgetary provisions for the AMRUT, the BE remains the same between the FY 2022-23 and RE FY 2021-22 at Rs 7,300 crore. In case of SCM, the RE for FY 2021-22 has been kept at Rs 6,600 crores and the BE for FY 2022-23 has been estimated at Rs 6,800 crores, suggesting recovery to the planned level. Additionally, the budget 2022-23 also have provisions for City Investment to Innovate, Integrate and Sustain (CITIIS), a new initiative under SCM. This year budget has not made any announcement to carry forward the National Urban Digital Mission, announced last year, for transforming urban governance Nevertheless, Digitalization of land use records under Land Records Management through Unique Land Parcel Identification Number and One-Nation One-Registration Software is a welcome step as they will make information organized, accessible and less obscure and contribute to the tech infrastructure revolution.
The flagship program for urban housing – Pradhan Mantri Aawas Yojana – Urban (PMAY-U), Housing for All by 2022 – has received record high allotment of Rs 28,000 crore in BE for FY 2022-23. This has been following the incredible success in the affordable housing push and budgetary realization in previous two FYs. The AE for FY 2020-21 was 20,990 Crore (BE was Rs 8,000 crores). During the FY 2021-22 the BE was Rs 8,000 crores which has been revised to whopping RE of Rs 27,000 crores. In terms of number, urban housing for poor has come out to be the biggest thrust and achievement in recent budgets. However, interventions, especially for the migrant and rental citizens have lost focus. This comes after the disproportionate burden of the pandemic being borne by the same.

Envisaging Cities of New India @ 100

One positive feature of this year’s budget announcements relates to the focus on developing Tier 2 and Tier 3 cities and, if properly operationalized, can ensure balanced urban development in India. Promotion of use of public transport in the cities complemented by clean tech and governance solutions, special mobility zones with zero fossil-fuel policy, and electric vehicles (EV) could make the cities more liveable. Adoption of battery-swapping policy and encouragement for private sector to develop sustainable and innovative business models are expected to provide further fillip to adoption of electric vehicles and make the city mobility system cleaner. The central government’s financial support for mass transit projects and AMRUT can be leveraged for state level implementation of these schemes.
This year’s budget has also the provisions for modernisation of building byelaws, town-planning schemes and transit-oriented development (TOD), energy efficiency in buildings and infrastructure for circular economy that cities are struggling to implement. In particular, with the allocation of Rs 15,000 crore, the ‘Scheme for Financial Assistance to States for Capital Investment’ will facilitate the implementation of these reforms.
The big push to the PM Gatishakti National Master Plan, AatmaNirbhar Bharat and the National Infrastructure Pipeline (NIP) is a welcome move towards physical and logistical infrastructure, manufacturing and allied sectors to boost production, its transportation, employment and ultimately, the economy.

Verdict

Lack of capacity is a major issue in Indian cities. The announcements of a high-level committee of reputed urban planners, urban economists and institutions and designating five institutions as centres of excellence with an allocation of Rs 250 crore each for “India-specific urban knowledge” are expected to directly address the capacity issues as well as the governance deficits. However, even after more than 25 years of the 74th Amendment to the Constitution, majority of our cities lack autonomy to make and implement decisions that are responsive to local needs. Unless the cities are genuinely empowered, such announcements are unlikely to usher in the envisaged ‘paradigm change’.
Numerous studies have reported the incidence of unprecedented job and income losses on account of COVID 19 in our cities. In August last year, a parliamentary standing committee recommended the introduction of an urban national job guarantee scheme on the lines of MGNREGA to the Union government. This year’s budget seems to miss the opportunity towards generating jobs and reducing vulnerabilities of the urban poor. Even the budgeted allocation under Deendayal Antodaya Yojana National Urban Livelihood Mission (DAY-NULM) has increased marginally from 795 crores in FY 2021-22 to 900 crores in current FY. Creation and sustenance of community-based livelihood opportunities as well as their integration with other schemes for water, sanitation, and hygiene could have been beneficial both for enhancing livelihood security and improving service coverage especially for the urban poor amidst the pandemic and beyond.
Overall, this budget is a good step forward but needs to be backed by appropriate institutional reforms with greater scope for people participations in formulation and implementation of urban plan and policies. Only then we can be optimistic of building inclusive and sustainable cities within Amrit Kaal of next 25 years.

---
*Soumyadip Chattopadhyay, Associate Professor of Economics, Visva Bharti University, Santi Niketan and Senior Fellow at IMPRI Impact and Policy Research Institute, New Delhi; Arjun Kumar (arjun@impriindia.org), Director, IMPRI