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Will Budget 2024 help empower city govts, make them India's growth engines?

By Soumyadip Chattopadhyay, Arjun Kumar*

Cities in India are envisioned as engines of growth. Any meaningful long-term vision for India would be incomplete without planning for the cities and quite rightly, urbanization is considered as one of the country’s top developmental challenges. Realization of full potential of cities depends crucially on their ability to provide ‘enabling’ environment especially in terms of sustained provision of a wide range of urban infrastructure and services.
Unfortunately, inadequate provisioning and improper maintenance of urban infrastructure and basic services are very common to almost all the cities in India which, in turn, greatly reduce their economic potential. The interim budget 2024-25 is driven by the vision of Viksit Bharat (Developed India) by 2047 and government policies are particularly focusing on improving infrastructure at a grand scale.
For our cities, the Central flagship programs including Smart Cities Mission (SCM), Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Swachh Bharat Mission – Urban (SBM-U), Pradhan Mantri Awas Yojana – Urban (PMAY-U), and so on, coupled with many infrastructural developments have aimed at the promotion of sustainable infrastructure development in Indian cities.

Urban India’s budget at a glance

The Ministry of Housing and Urban Affairs (MoHUA) budget estimate (BE) for urban development has increased by 12% from FY 2023-24 revised estimate (RE) of budget of Rs 69,300 crore and now stands at Rs 77,500 crore. In last year’s budget, the ministry was allotted BE of Rs 76,400 crore.
One of the key takeaways of the Interim Budget 2024-25 is the thrust on launching “a scheme to help deserving sections of the middle class living in rented houses, or slums, or chawls and unauthorized colonies to buy or build their own houses”.
The PMAY – Urban, flagship central scheme for urban housing, has been allocated Rs 26,100 crore in the Interim Budget, equivalent to an increase of 18% over the budgetary figure of Rs 22,100  crore (revised estimates) of the last financial year. Increasing budgetary allocation seems to be based on better performance of the PMAY-U scheme as compared to the previous centrally sponsored housing schemes.
As on January 29 2024 under PMAY-U, around 118.63 lakh houses have been sanctioned, of which 114.01 lakh houses have been grounded for construction and 80.02 lakh houses are completed. Since inception in 2015, a total of 1.19 crores houses have been sanctioned. The PMAY comprises of four verticals: Insitu re-development of slums (ISSR); Credit-linked subsidy for housing (CLSS); Affordable housing in partnership (AHP), and; Enhancement and construction of beneficiary houses (BLC).
The Swachh Bharat Mission Urban received a substantial increase in allocations of Rs 5,000 crore, almost double that of the revised estimate for FY 2023-24 of 2,500 crore. This reflects a positive commitment to a cleaner India, with increased allocation supporting scientific management of dry and wet waste, mechanised desludging of septic tanks and sewers, and sanitation.
The Smart Cities Mission (SCM) and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) have received reduced budget allocations in FY 2024-25 of Rs 10,400 crore (BE) in FY 2024-25, compared to Rs 16,000 crore (BE) and Rs 13,200 crore (RE) in FY 2023-24. A dip in SCM's allocation from Rs 7,600 crore in 2023-24 to Rs 2,300 crore in 2024-25 is strategic in nature with SCM’s forthcoming expiration in June 2024. The budget estimate for the AMRUT scheme remained the same as the previous year in FY 2024-25 at Rs 8,000 crore.
The Metros and MRTS scheme saw a slight increase in BE for FY 2024-25 at Rs 24,900 crore compared to FY 2023-22 at Rs 23,100 crore. This has the potential for improving interconnectivity across larger and smaller towns in turn facilitating speedy and cost-effective access to jobs, contributing to economic efficiency enhancement of the cities.
The National Capital Region Transport Corporation received BE of Rs 3,500 crore for FY 2024-25 which was the same as the BE & RE for FY 2023-24. The allocation of Rs 1,300 crore to procure electric buses under the PM-eBus Sewa scheme is a significant step towards promoting sustainable urban mobility.
Allocation of funds to the tune of Rs 1,400 crore under the National Urban Digital Mission can also potentially improve the delivery of basic urban services and strengthen the capacity of the urban ecosystem. However, meagre budgetary allocation under the Deendayal Antodoya Yojna (DAY-NULM) is a serious policy concern.
Street Vendors Scheme (PM-SVANIDHI) with a budgetary allocation of Rs 326 crore is expected to counterbalance the dip in allocation for the DAY-NULM although it sees a slight decrease in its allocation from Rs 468 crore (BE 2023-24). PM-SVANIDHI is a micro-credit scheme that provides collateral-free working capital loans of up to Rs 50,000 to street vendors. It has provided credit assistance to 78 lakh street vendors, out of which 2.3 lakh have received credit for the third time.

Issues and concerns

The FM has made an attempt to put up a vision plan for urban development by duly emphasizing the importance of infrastructural development. The task of squeezing the nation’s growing urban population into India’s towns and cities, regardless the redevelopment of existing towns, seems near impossible.
The government faces an urban duality, it is on one hand expected to create a new metropolises and satellite cities and on the other hand allocations are to be made for the upkeep of old cities. These towns and cities would also have to be designed differently, taking into consideration sustainable energy consumption, vehicular mobility, effective policing, blended land use (both commercial and residential) and seamless connectivity between towns and cities.
However, Indian cities are hamstrung by a series of structural and institutional problems leading to improper implementation of urban plan and programs. In case of SCM, only 50% of the funds have been utilized. AMRUT records 51% fund utilization for water supply and 30% fund utilization for sewerage facilities.
Even after 30 years of the 74th Constitutional Amendment Act (CAA) for decentralised urban local bodies, not a single city government in India has control over all 18 functions as specified in the 12th Schedule. Parastatal agencies controlled by the State government and Special Purpose Vehicles in case of smart cities plan and operate bulk of the critical infrastructure including transport, water supply, sewerage and storm water drainage systems. Lack of synchronization of responsibilities among the multiple agencies leads to poor availability of urban infrastructure and basic services.
The cities also face revenue shortfalls as municipal revenue continues to account for a small share of GDP in India. More alarmingly, cities tend to spend more on per capita basis on general administration and salaries, leaving limited funds for development.
Essentially, the cities often get entangled in a vicious circle where paucity of resources causes poor service delivery, leading to poor revenue generation. Moreover, majority of the city governments are understaffed. As per the Annual Survey of India City System report, Indian megacities are working with significantly less municipal staff.
New York has 5,906 municipal staff per lakh population while the corresponding figures range from 317 in Bengaluru to 938 in Mumbai. Further, cities struggle with inadequate data as many cities have only limited information on the needs of their residents. For instance, in urban housing, developers lack insight into low-income households' needs, and these households lack involvement opportunities. Such gaps result in misguided policies.
With a burgeoning city population, India faces a formidable task to achieve its vision of cities as growth engines. There is an urgent need to empower the city governments through according equal importance to three Fs – functions, funds and functionaries.
Financially empowered city governments with clear functional domain and adequate institutional capacity can facilitate the transformative shift towards building inclusive and sustainable cities and thus shaping India into a 'Viksit Bharat' by 2047.
*Dr Soumyadip Chattopadhyay is associate professor, Visva-Bharati, Santiniketan, and visiting senior fellow, Impact and Policy Research Institute (IMPRI), New Delhi; Dr Arjun Kumar is Director, IMPRI. This article was prepared with the assistance of Rehmat Arora, researcher, IMPRI



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