Historically, cities have emerged as engines of growth pushing the economy towards production, innovation and trade. The chapter, From Competitive Federalism to Competitive Sub-Federalism: Cities as Dynamos, in the Economic Survey, 2016-17 starts by quoting Jane Jocobs, a documenter of cities. She links the idea of cities to economic growth and prosperity. It takes the concept of ‘competitive federalism’ to a new level, i.e. Urban Local Bodies (ULBs) of the cities by discussing the problems and the possibilities that lie ahead in this approach. Unleashing ULBs dynamism might spark sub-federalism but when central/state/local bodies are governed by different political parties, it leads to political bickering; opening up the bigger questions of policy preferences, allocation of resources and the implementation. Later, upon failing to deliver, the problem is linked to the migrants instead of acknowledging the failure of policy.

Since the economic liberalisation, India has witnessed a rise in its urban population, where 380 million people are living in its 8,000 cities, forming about one-third of its total population and accounting for three-fifth of the country’s total GDP. As the rural economy stagnates and employment opportunities shrink further, a large number of households from rural India turn towards the cities with the expectation of a higher income. There is a need to study these changing dynamics of urbanisation in India. This expected exodus of rural India into the cities in the coming decades will pose a tremendous challenge for the government, particularly for ULBs, who are already failing to provide the basic services to its established residents. But if entrusted with responsibilities, empowered with resources, entitled with decision-making and encumbered by accountability, ULBs can become an effective vehicle to unleash the powerful dynamism of change which can extend the competition between states and cities, as well as between the cities themselves.

Contradictory to the common perception, India’s urbanisation rate is similar to that of other countries. It only lags a little behind the global pattern of urbanisation where its level has increased more rapidly with per capita GDP. If not the magnitude of urbanisation, the pattern of the size of the urban centers seems to be special. These settlements do not seem to follow the Zipf’s law, which claims that in any country, the city with the largest population will be twice as large as the next-biggest; three times the size of the third biggest and so on. In other words, the nth ranked city would be 1/nth the size of the largest city. This law holds true for many countries but India. The small cities in India are unusually small. Contrary to what one might think, even the large cities are smaller than their expected size according to the Zipf’s law. Among the number of reasons for the stark situation, declining land-to-population ratio and over-burdened infrastructure seem to explain the unusual small size of the large Indian cities. This continues to widen the infrastructure deficit in the large cities leading to coming up of dense slum-like areas.

Challenges faced by the ULBs

The primary responsibility for the development of these urban areas lies with the state governments, municipal corporations, municipalities and nagar panchayats, commonly known as urban local bodies (ULBs), which face the challenge of poor governance, inadequate finances and large infrastructure deficits.

Playing the blame game

A city usually has multiple local government agencies which are rarely led by a single political party, resulting in functional overlap, asymmetric financial disbursements and political squabble.

A report by Centre for Policy Research in August 2015, documents the functions and activities of three key agencies—the Delhi Development Authority (DDA), the Delhi Jal Board (DJB), and the Delhi Urban Shelter Improvement Board (DUSIB). While DDA reports to the central government, the other two agencies answer to the state government, making no efforts to coordinate with each other for delivering services. During one such incident on 15 April 2013, the Public Works Department (PWD) of the Delhi state government, without any due diligence, bulldozed a section of the Sonia Gandhi Camp in South Delhi for road widening process, which a year later was transformed into flowerbeds. This action cracked open the coordination relation and functional overlap between PWD and DUSIB, both of which answered to the ‘same’ state government.

The controversial trifurcation of Municipal Corporation of Delhi (MCD) into North Delhi, South Delhi and East Delhi Municipal Corporation(s) in 2011 by the state government of Delhi is a recent example of asymmetric financial disbursements. On division, the smallest cooperation of the three—EDMC—received the largest share of debt with the smallest revenue base and approximately 20% fewer grants than the nearly equally populated NDMC.

These quarrels over governance, finances and jurisdiction area leave behind the unanswered broader questions on the basic services that exist largely on paper. Nearly every city in India faces serious infrastructure challenges related to water and power supply, waste management, public transport, education, healthcare, safety, and pollution. The State of World Cities 2012/13 also highlights the low level of infrastructure in India’s largest cities of Delhi and Mumbai.

According to a High Powered Expert Committee (HPEC) appointed by the Ministry of Urban Development (MoUD), about Rs. 39 lakh crore was required to address this urban infrastructure deficit over the next 20 years. On similar lines, the Fourteenth Finance Commission has also recommended a grant of around Rs. 87,000 crores for the assistance of the municipalities for the period 2015-20. The commission also stressed on municipalities raising funds using local resources in the form of property tax and issuing municipal bonds. The suggestions failed to consider the 74th constitutional amendment which leaves it to the discretion of state legislatures to devolve finances to the ULBs. Some states have not even allowed the municipalities to levy property taxes. Floating municipal bonds seems even more difficult owing to the lack of transparency, the poor state of finances and governance of the ULBs.

Empowering ULBs

The state government should start by leveraging the availability of National Remote Sensing Agency to assist ULBs in Geographic Information System mapping of all properties in its jurisdiction. Different analyses have shown that municipalities that generate more resources have been able to deliver more basic services. The states should, therefore, decentralise its control over taxes to empower ULBs to levy all feasible taxes. The ULBs should then use this opportunity to increase its tax base and its efficiency in tax collection to make the most out of its existing taxpayers.

It is important to recognise, deal and remove the challenges in the political economy to ensure that ULBs get adequate resources for their functioning. The efficiency of these allocated resources can be checked by increasing the transparency and ensuring periodic disclosure of the data on the web. NITI Aayog could also help by releasing comparative indices of ULBs’ performance using various yardsticks in order to promote competitive sub-federalism.

The state government can start laying the foundation of this competitive federalism by acknowledging and rectifying their policy flaws and shortcomings rather than hiding their face by blaming migrants. Otherwise, this skewed urbanisation cannot be translated into a healthy long-term model.

List of citations and references

1. “World Cities Report 2016, Urbanization and Development: Emerging Futures,” UN-Habitat, http://wcr.unhabitat.org/wp-content/uploads/sites/16/2016/05/WCR-%20Full-Report-2016.pdf
2. “From Competitive Federalism to Competitive Sub-Federalism: Cities as Dynamos,” Economic Survey 2016-17, Ministry of Finance, Government of India, http://indiabudget.nic.in/es2016-17/echap14.pdf
3. Bhanu Joshi and Shahana Sheikh, “State versus Municipal Funds Rethinking Urban Finance in Delhi,” Economic and Political Weekly, http://www.epw.in/journal/2015/20/reports-states-web-exclusives/state-versus-municipal-funds.html, published on May 16, 2015, accessed on October 9, 2017.
4. Kaveri Gill, “Of poverty and plastic scavenging and scrap trading entrepreneurs in Indias urban informal economy,” Oxford University Press, 2012.
5. “Exclusion, Informality, and Predation in the Cities of Delhi,” Centre for Policy Research, http://www.cprindia.org/sites/default/files/working_papers/new%20CoD_Overview.pdf accessed on October 9, 2017
6. “India Exclusion Report 2016,” Centre For Equity Studies, http://defindia.org/wp-content/uploads/2017/07/India%20Exclusion%20Report%202016_low.pdf, published in 2016, accessed on October 9, 2017.
7. “Categorisation of Settlement in Delhi,” Centre for Policy Research, http://www.cprindia.org/sites/default/files/policy-briefs/Categorisation-of-Settlement-in-Delhi.pdf, published in May, 2015 accessed on October 9, 2017.

Aryan Agarwal, the author, is a third year economics major student from Shiv Nadar University.

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