A recent World Bank report estimates that India will require about ₹70 lakh crore by 2036 to meet its urban infrastructure needs while spending is just a little over one-fourth of the required.

Key Statistics and Projections for urban infrastructure in India

• Urban Population: India’s urban population is projected to grow from 400 million in the last decade to 800 million over the next three decades.
  • By 2036, its towns and cities will be home to 600 million people, or 40 percent of the population, up from 31 percent in 2011, with urban areas contributing almost 70 percent to GDP as per the World bank.
• Urban Financing: The World Bank report estimates that India requires ₹70 lakh crore by 2036 to meet its urban infrastructure needs, translating to ₹4.6 lakh crore annually.
  • The government investment stands at ₹1.3 lakh crore annually, which is only 27% of the required amount as per 2018 data.
  • About 50% of the required investment is estimated for basic urban services, and the remaining 50% for urban transport.

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Key Challenges of Urban Infrastructure in India

• Municipal Finances

  • Funding Gap: India requires ₹4.6 lakh crore annually for urban infrastructure, but current investment stands at only ₹1.3 lakh crore, which is just 27% of the requirement.
  • Municipal Finances: Municipal finance has stagnated at 1% of GDP since 2002.
  • Declining Self-sufficiency: The share of municipalities’ own revenue has fallen from 51% to 43% between 2010 and 2018.
  • Inefficiencies in Tax Collection: ULBs like Bengaluru and Jaipur collect only 5%-20% of their potential tax revenue. Property tax collection is a mere ₹25,000 crore annually, equivalent to only 0.15% of GDP.
  • Low Cost Recovery: Revenue generation from urban services covers only 20%-50% of costs.
• Low Absorptive Capacity
  • Unspent Funds: About 23% of total municipal revenue remains unutilized, indicating inefficiencies in fund usage.
  • Underutilisation of Budgets: Cities like Hyderabad and Chennai utilized only 50% of their capital expenditure budgets in 2018-19.
  • Scheme Utilisation: Central schemes such as AMRUT and Smart Cities Mission have utilisation rates of 80% and 70%, respectively, reflecting implementation challenges.
• Decline in PPP Investments
  • Reduced Investments: PPP investments in urban infrastructure peaked at ₹8,353 crore in 2012 but dropped sharply to ₹467 crore by 2018.
  • Lack of Viability: Projects often lack project-specific revenues or viability gap funding, making them commercially unattractive for private investors.
• Inefficiencies in Urban Local Bodies (ULBs)
  • Weak Fiscal Autonomy: ULBs are heavily dependent on State and Central transfers, which increased from 37% to 44% but remain insufficient for sustainable financing.
  • Limited Capacity: ULBs lack the technical and administrative capacity to effectively plan and execute urban infrastructure projects.
• Poor Integration with Urban Development
  • Land Value Capture Challenges: Despite significant investment in urban transport (e.g., metro projects), there is insufficient integration with urban development to harness land value near transit hubs.
  • Outdated Practices: Urban service delivery, especially in public transport, is hampered by obsolete management techniques.
• Environmental and Social Sustainability Issues
  • Climate Vulnerabilities: Many projects are not designed with environmental and social sustainability in mind, which is critical given India’s high vulnerability to climate change.
    • Mumbai’s coastal roads and drainage systems are increasingly prone to flooding due to inadequate planning for climate change impacts.  
  • Haphazard Project Preparation: Projects are often rushed, resulting in incomplete designs and inadequate consideration of long-term impacts.
    • In Bengaluru, lake rejuvenation projects were poorly planned and rushed, failing to address issues like encroachments and waste management, resulting in short-term improvements and long-term environmental degradation.
• Challenges of Urban Expansion
• • Unplanned Urban Growth: Rapid urbanization has led to the unplanned expansion of cities, often resulting in urban sprawl. 
    • The unregulated expansion of cities like Gurugram has led to severe urban sprawl, resulting in inefficient land use and increased dependency on private transport.
  • Encroachment on Agricultural and Ecological Land: Expanding urban areas often encroach on fertile agricultural land and ecologically sensitive zones, threatening food security and biodiversity.
    • In Bengaluru, urban expansion has caused the loss of lakes and green spaces, leading to frequent flooding and urban heat island effects.
  • Inefficient Land Use: Poor planning and fragmented land development policies have resulted in inefficient land use, creating challenges in providing adequate housing, transport, and basic services.
  • Inadequate Planning for Peripheral Areas: Suburban and peri-urban areas often lack proper infrastructure, governance, and connectivity, leading to uneven development and service delivery gaps.
    • The rapid growth of cities like Hyderabad has left peripheral areas with inadequate infrastructure, poor connectivity, and limited access to essential services, exacerbating inequality and regional disparities.

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Key government schemes for urban infrastructure in India

• Atal Mission for Rejuvenation and Urban Transformation (AMRUT): 
  • Launched in 2015, this scheme focuses on developing basic urban infrastructure in 500 cities. 
  • This includes water supply, sewerage, storm water drainage, non-motorized urban transport, and green spaces. 
• Urban Infrastructure Development Scheme for Small & Medium Towns (UIDSSMT): 
  • Launched in 2005-06, this scheme aims to improve infrastructure in small and medium towns. 
  • The scheme was launched for a period of seven years, beginning in 2005-06.
• Pradhan Mantri Awas Yojana – Urban (PMAY-U): This scheme includes In-Situ Slum Redevelopment (ISSR), which uses land as a resource for slum rehabilitation. 
  • It was launched on 25th June 2015.
  • Objective: Provide housing for all in urban areas.
  • Beneficiaries: Economically Weaker Section (EWS), Low-Income Group (LIG), and Middle-Income Group (MIG).
• Swachh Bharat Mission (Urban) or SBM (U): 
  • The program was launched on October 2, 2014, to honor Mahatma Gandhi on his 150th birth anniversary. 
  • The ultimate goal of SBM-U is to declare cities and wards as Open Defecation Free (ODF). A city or ward is considered ODF if no one is found defecating in the open at any time of the day. 
• Smart Cities Mission: 
  • The mission was launched in June 2015 and was originally scheduled to be completed in 2020. It has been extended until March 2025. 
  • Goal: To develop 100 smart cities across the country and to improve quality of life by making cities more sustainable, inclusive, and economically prosperous 
  • As of July 2024, the 100 Cities have completed 7,188 projects (90% of total projects) amounting to ₹ 1,44,237 crore as part of the Mission.
• Pradhan Mantri-eBus Sewa Scheme:
  • The Pradhan Mantri-eBus Sewa scheme is a program to increase the number of electric buses (e-buses) in cities. 
  • The scheme was launched on August 16, 2023. 
  • Goal: The scheme aims to deploy over 38,000 e-buses from 2024-25 to 2028-29.  
• National Urban Digital Mission: 
  • The National Urban Digital Mission (NUDM) is a program to digitize municipal services and create a shared digital infrastructure for India’s cities and towns. 
  • Goal: To reduce the digital divide between cities and towns, and to ensure that digital services are available across the country
  • Launched in February 2021 by the Ministry of Housing and Urban Affairs (MoHUA) and the Ministry of Electronics and Information Technology (MEITY).

Reform Measures for Urban Infrastructure in India

• Long-term Structural Reforms
  • Strengthening State Finance Commissions: Empower State Finance Commissions to ensure equitable financial devolution to urban local bodies (ULBs).
  • Enhancing Municipal Autonomy: Provide ULBs with greater financial and administrative autonomy to enable better resource management and project implementation.
  • Promoting Private Sector Involvement: Attract private capital through municipal bonds and debt borrowing mechanisms.
    • In 2017, the Pune Municipal Corporation (PMC) was widely commended for raising ₹2 billion through municipal bonds.
• Medium-term Reforms
  • Developing a Robust Project Pipeline:
    • The High-Powered Expert Committee and 12th Plan Working Group propose a ₹70 lakh crore urban infrastructure investment over 20 years, with 15% funded via PPPs. 
      • This requires 250-300 annual PPP projects, supported by a pipeline of 600-800 projects.
    • Align projects with long-term urban development goals, ensuring readiness for implementation.
  • Decoupling Project Preparation from Financial Assistance:
    • Allow sufficient time and resources for detailed project preparation to ensure financial, social, and environmental sustainability.
    • Focus on climate-resilient and future-ready infrastructure designs.
  • Leveraging Digital Public Infrastructure (DPI):
    • Modernize urban service delivery, especially in public transport, by using digital tools for planning, execution, and monitoring.
    • Utilize data analytics and automation to improve operational efficiency and citizen experience.
  • Capturing Land Value in Urban Projects:
    • Integrate urban transport projects (e.g., metro and rail) with urban development to capture increases in land value.
    • Implement policies for Transit-Oriented Development (TOD) to bring jobs and housing closer to transport hubs.
• Financing and Revenue Generation
  • Improving Municipal Revenue Streams:
    • Strengthen property tax systems by updating records, enhancing collection efficiency, and leveraging technology.
    • Diversify non-tax revenue sources such as user charges, advertisements, and parking fees.
  • Introducing Incentive-Based Grants:
    • Link central and state grants to ULBs’ performance in infrastructure development and service delivery.
    • Encourage competition among municipalities to achieve better outcomes.
• Capacity Building and Institutional Strengthening
  • Building Administrative and Technical Capacity:
    • Train ULB personnel in financial planning, project management, and modern governance practices.
    • Develop standardized frameworks and toolkits for project preparation and execution.
  • Promoting Citizen Engagement:
    • Encourage participatory planning processes to ensure that infrastructure projects address the needs of all stakeholders.
    • Increase transparency and accountability through public monitoring mechanisms.
• Collaboration and Coordination
  • Strengthening Multi-level Governance:
    • Improve coordination between central, state, and local governments for seamless policy implementation.
    • Promote integrated urban planning across sectors such as housing, transport, and environment.
  • Engaging the Private Sector:
    • Create risk-sharing mechanisms to make PPPs more attractive and sustainable.
    • Develop a clear regulatory framework to ensure private sector participation is mutually beneficial.

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Conclusion

India’s urban future hinges on addressing financial, structural, and governance challenges through innovative reforms and collaborative efforts. By prioritizing sustainable practices, leveraging technology, and empowering local governments, India can create inclusive, efficient, and climate-resilient urban spaces to meet the demands of its growing population.

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