Friday, May 28, 2010

India's urban nightmare: Building inclusive cities, sustaining Economic growth

My brother-in-law was caught in an evening downpour in Bangalore not long ago. He was on a scooter, on his way home, and he found himself struggling through streets where water reached to his thighs. The city’s drains were overwhelmed. He was driving through a mix of rain and sewage.

At one particularly deep point, the water rose above his engine. His scooter sputtered. He swallowed a mouthful. About a week later, he developed jaundice. He wasn’t sure what caused it, but the doctors were certain of one thing: the sewage water he consumed couldn’t have helped.

I’ve written before about the deplorable state of Indian cities. My brother-in-law’s experience may have been egregious, but anyone who has spent time in urban India would recognize the basic elements of his story: a collapse of municipal infrastructure, chaotic roads, an environment filled with health hazards.

By virtually any measure, the quality of life in Indian cities is abysmal. Only 60 percent of municipal waste is collected. Just 30 percent of urban sewage is treated. According to a recent government study of 127 cities, 80 percent of them had at least one pollutant that exceeded air quality standards.

A few decades ago, when the vast majority of Indians lived in the countryside and when agriculture represented around a third of national income, all of this would perhaps have been cause for less concern. But today, with India rapidly urbanizing, moving to an economy where services represent more than half of gross domestic product, cities matter a lot more. They represent both the tremendous possibility of India, but also potential bottlenecks in its development.

A study released last month by McKinsey, the consulting firm, does a good job of capturing the critical role played by Indian cities. The report, titled “India’s Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth,” contains an acute analysis of the opportunities and challenges presented by urban India.
As one would expect from a McKinsey study, the number-crunching is impressive — and the numbers themselves staggering. Between now and 2030, the report estimates, 250 million Indians will migrate to the cities, a figure that exceeds the current total population of all but three countries (China, India and the United States). As a result, India will have 68 cities with populations of more than one million (compared with 35 in all of Europe today).

Migration on that scale represents tremendous economic opportunity. The report’s authors calculate that, over the next 20 years, 70 percent of new jobs in India will be in urban areas and that the cities’ share of gross domestic product will rise to 70 percent from 58 percent. Fulfilling that potential, however, depends on managing the transformation well. And, given India’s abysmal record when it comes to even relatively modest rates of urbanization over the past few decades, the coming urban wave could just as well spell disaster as opportunity.

Shirish Sankhe, the report’s lead author, told me that the overarching message of the report was this: “India can basically take two paths. One path is the urban reform path, and one is the status quo path. One path leads to chaos and urban gridlock. The other can add up to 1.5 percent to G.D.P.”

In Mr. Sankhe’s view, there are two main challenges to the “reform path” — governance and financial. Perhaps surprisingly, the financial challenges appear less daunting. Although the sums of money required to modernize Indian cities are huge (around $10 billion a year, more than three times current levels of investment), the report argues that many of these funds can be generated by cities themselves through more efficient property taxes, unlocking the value of land assets and raising prices for things like water supply, mass transit and sewage treatment.

From Akash Kapoor's write up in The New York Times
To read the full write up click here

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