India urbanization: making of urban India


It is well accepted that India needs huge investment in improving the infrastructure and providing basic amenities to its citizens.

The need for investment will further increase in the coming years as a large number of people will move to urban areas and the process of urbanization will also accelerate. According to an estimate, 17 of the 20 fastest growing cities in the world between 2019 and 2035 will be in India. This is a huge opportunity. Increasing urbanization can become a sustainable source of long-term economic growth.

One of the major reasons for low investment in urban areas is the very limited availability of resources in the municipal bodies. However, the situation can be changed with the right policy interventions. As this newspaper wrote in a report on Monday, the central government is putting a lot of emphasis on municipal bonds.

The government has identified 30 cities with good ratings. Surat and Visakhapatnam are also expected to move to the bond market soon. Talking about big cities, Chennai can raise money from the bond market this year. The municipal bodies of the identified cities are known to have done most of the work or are in the process of doing so. He is rationalizing property tax and streamlining the books of accounts. They are also identifying revenue generating projects.

For example, Surat and Visakhapatnam are planning to raise funds by expanding existing projects to generate assured revenue. It does not appear that these bond issues will face any difficulties. At a broader level, the central government should be commended for its efforts to expand the scope and depth of the municipal bond market, while also pushing sustainable urban infrastructure funding on the G20 agenda. Has been However, these are only initial steps and much more needs to be done.

The focus on raising funds through municipal bonds is also not going because there is not much information available in the public domain. The Reserve Bank of India collated data related to municipal bodies and published a first of its kind report in 2022 which is a good thing. He wants to make it an annual event. It is worth noting that in the calculation of the general government debt of the Reserve Bank, the debt of the center and the states is taken into account. It excludes local bodies as their consolidated data is not available. Now the central bank wants to bridge this gap which will give a better picture of the government’s financial position. The Reserve Bank’s sample of 201 municipal bodies found that tax revenue receipts were only 0.61 per cent of GDP in 2017-18, while it was estimated to increase to 0.72 per cent by 2019. Municipal corporations depend heavily on grants from the other two levels of government. Despite constitutional support to local bodies, there has been no significant change in the total revenue collection.

Another aspect related to the economics of municipal bodies is that their combined borrowing is about 0.05 per cent of GDP. This increases the scope of raising funds from the market. However, it should be noted that there are some potential risks to increasing debt. Municipal bodies need reforms and also need right sources of revenue so that loan repayment is done on time. Overall, while a large number of municipal bodies do not comply with the conditions set by the securities market regulator, increasing participation in the bond market with appropriate reforms will definitely help in building an urban India.

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News Desk
News Desk
Contents published under this byline are those created by the news team of BLiTZ

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