Cities and Public Policy: An Urban Agenda for India

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Prasanna K. Mohanty

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    List of Illustrations

    Tables
    • 1.1 Empirical Assessment of Agglomeration Economies 32
    • 2.1 Per Capita GNP and Levels of Urbanization 1800–1980: Developed Countries and Third World 49
    • 2.2 Percentage of Industrial Employment and Levels of Urbanization (1800–1980) 50
    • 2.3 A Comparative Assessment of Urbanization Levels in Europe 54
    • 2.4 Urban Population (in million) and Level of Urbanization (in percentage) 1800–1910 55
    • 2.5 Components of Urban Population Growth in India: 1961–71 to 1991–2001 (percentage) 56
    • 3.1 Committee on Urban Land Policy (1965): Major Recommendations 99
    • 4.1 Poverty Line (₹ per capita per month), Number (in million), and Percentage of Population below Poverty Line (BPL) in Urban and Rural Areas (1973–74 to 2004–5) (Lakdawala methodology) 114
    • 4.2 Poverty Line (₹ per capita per month), Number (in million), and Percentage of Population below Poverty Line (BPL) in Urban and Rural Areas (2004–5 to 2009–10) (Tendulkar Methodology) 117
    • 4.3 Distribution of Slums in India by Access to Housing and Basic Amenities (percentage of slums) 121
    • 4.4 State of Health of the Urban Poor in India (2005–6) 125
    • 4.5 Formal and Informal Employment in Unorganized and Organized Sectors (1999–2000, 2004–5, and 2009–10), in million (%) 127
    • 4.6 Employment by Unorganized and Organized Sectors (1999–2000, 2004–5, and 2009–10), in million (%) 129
    • 4.7 Delhi Master Plan 2021: Planning Norms for Informal Shops/Units 141
    • 5.1 Status of Municipal Finances of all States: 2002–3 and 2007–8 153
    • 5.2 Typology of Twelfth Schedule Municipal Functions 159
    • 5.3 Greater Bengaluru Water and Sanitation Project—Scales of Beneficiary Capital Contribution 175
    • 6.1 United Kingdom: Evolution of Taxation of Planning/Development Gain (1909–2008) 195
    • 6.2 Land Monetization: Select Projects of Developing Countries 209
    • 6.3 Andhra Pradesh: Land-based Financing Instruments 212
    • 7.1 Service Level Benchmarks at a Glance 246
    • 8.1 Share (in percentage) of Employment and Gross Value Added (1999–2000 and 2009–10) 252
    • 8.2 Total Employment by Sector (1999–2000, 2004–5, and 2009–10) 253
    • 8.3 Economic Importance of Urban Areas in Developing Countries 257
    • 8.4 Gross Domestic Product by Economic Activity in India at Constant 1999–2000 Prices (percentage share) 261
    • 8.5 Sectoral Contributions to Gross Domestic Product in OECD Countries: 1997–2007 262
    • 8.6 Conventional Revenue Sources and New Options for Financing City Development and Services 274
    • 8.7 Using Urban Land as a Resource to Finance Urban Development 276
    Figures
    • 2.1 Over-migration in Harris–Todaro Model 61
    • 2.2 Urban Agglomeration Economies and Rural–Urban Migration 63
    • 2.3 Urban Agglomeration Economies and Social Under-migration 65
    • 7.1 Performance Management in Local Government 245

    List of Abbreviations

    ARCAdministrative Reforms Commission
    BPLBelow Poverty Line
    BRTBus Rapid Transit
    BRTSBus Rapid Transit System
    C&AGComptroller and Auditor General
    CBDCentral Business District
    CBOCommunity-based Organization
    CDPCity Development Plan
    CDSCity Development Strategy
    CILCommunity Infrastructure Levy
    CUVCurrent Use Value
    DDADelhi Development Authority
    DGTDevelopment Gains Tax
    DPCDistrict Planning Committee
    DPRDetailed Project Report
    DMICDelhi Mumbai Industrial Corridor
    DMRCDelhi Metro Rail Corporation
    ERPElectronic Road Pricing
    EWSEconomically Weaker Section
    FAOFood and Agriculture Organization
    FARFloor Area Ratio
    FHHFemale-headed Household
    FSIFloor Space Index
    GDPGross Domestic Products
    GISGeographic Information System
    GLAGreater London Authority
    GNPGross National Product
    GPSGlobal Positioning System
    GVAGrossValue Added
    HCRHead Count Ratio
    HDFCHousing Development Finance Corporation
    HDIHuman Development Index
    HPECHigh Powered Expert Committee
    IAIndustrial Area
    IDInstitution Development
    IL&FSInfrastructure Leasing and Financial Services
    IMRInfant Mortality Rate
    IRInvestment Region
    JDMJoint Development Management
    JLEJubilee Line Extension
    JNNURMJawaharlal Nehru National Urban Renewal Mission
    KUIDFCKarnataka Urban Infrastructure Development and Finance Corporation
    LDDLocal Development Documents
    LGTLand Gains Tax
    LIGLow Income Group
    LTALand Transportation Authority
    LTTLand Transfer Tax
    LVCLand Value Capture
    LVITLand Value Increment Tax
    LVTLand Value Tax
    MARMarshall-Arrow-Romer
    MMRMaternal Mortality Rate
    MMRDAMumbai Metropolitan Region Development Authority
    MPACMunicipal Property Assessment Corporation
    MPCMetropolitan Planning Committee
    MRITMetropolitan Region Improvement Tax
    MRPMixed Recall Period
    MRTSMass Rapid Transit System
    MTRCMass Transit Railway Corporation
    NCEUSNational Commission on Enterprises in the Unorganized Sector
    NFHSNational Family Health Survey
    NGONon-Government Organization
    NLTTNational Land Transfer Tax
    NSSNational Sample Survey
    NSSONational Sample Survey Organisation/Office
    NTCNational Textiles Corporation
    NTUSNomenclature of Territorial Units for Statistics
    ODOrganization Development
    ODCOrestad Development Corporation
    ODVOfficial Declared Value
    OECDOrganisation for Economic Cooperation and Development
    ORROuter Ring Road
    PLBPoverty Line Basket
    PMSPerformance Management System
    PPPPurchasing Power Parity
    R&DResearch and Development
    RAYRajiv Awas Yojana
    RTIRight to Information
    RSSRegional Spatial Strategies
    SFCState Finance Commission
    SLBService Level Benchmark
    TDRTransferable Development Right
    TfLTransportation for London
    TFRTotal Fertility Rate
    TIFTax Increment Financing
    TNUDFTamil Nadu Urban Development Fund
    TNUIFSLTamil Nadu Urban Infrastructure Financial Services Limited
    TODTransit Oriented Development
    TPSTown Planning Scheme
    ULBUrban Local Body
    UMTAUrban Mass Transportation Authority
    URPUniform Recall Period
    VIFValue Increment Financing
    VLTVacant Land Tax
    WSPFWater and Sanitation Pool Fund

    Preface

    Theory guides practice, and practice enriches theory. When combined, they provide powerful insights for effective policy-making. This book draws lessons from economic theory of cities, international and national best practices in urban management to develop an urban agenda for India. It recognizes the central role of cities in catalysing growth and generating public finance for economic development.

    Historically, cities have been at the forefront of civilization. They drove economic growth and innovation in developed countries during their urban transition. In India, till the launch of Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in 2005, national policy did not pay much attention to the development of cities. Not only policy-making but also research neglected the role of agglomeration externalities in cities as an untappped resource for economic development, including urban and rural development.

    Urban economic theory emphasizes that cities form and grow to reap the benefits of agglomeration economies. These economies are returns to density arising from the co-location of firms, households, and institutions. Agglomeration externalities, in conjunction with knowledge externalities, establish the pivotal importance of cities in the structural transformation of nations. Cities and their externalities provide a unique opportunity for accelerating growth and poverty reduction in India at the current stage of evolution. The country should not miss the opportunities offered by agglomerating cities and city regions. India needs to invest in resource-generating cities to propel a self-financed process of economic growth, powered by the forces of externalities.

    JNNURM is currently in an extended period after the completion of Phase I (2005–12). Phase II of the Mission is being planned. For the first time, India adopted a demand-driven and reform-linked approach to develop cities as catalysts of economic growth through JNNURM I. The Mission has brought urban issues to the fore at both national and state levels. It has also emphasized a strong reform agenda to be pursued by states and municipalities to enable cities discharge their fundamental role as engines of growth and places of living. This agenda includes city-wide framework for planning and governance, robust financial management systems for civic services, equitable access of the urban poor to land, housing, and basic amenities, adoption of major revenue instruments to finance urban infrastructure and services, conduct of governance in a transparent and accountable manner, etc. The reforms envisaged under JNNURM I have succeeded only partially. However, the fact that JNNURM I has triggered urban projects worth more than ₹105,000 crores is laudable. While catalysing the much-needed investment flows into the urban sector, a new phase of urban sector reform must be planned under JNNURM II. In this context, the present book aims at guiding Indian urban policy-makers, planners, and administrators. It also targets at meeting the needs of researchers and students in urban economics, planning, management, and finance.

    While writing this book, I have relied on my own experiences as Commissioner of Municipal Corporations of Visakhapatnam and Hyderabad and Vice-Chairman of Hyderabad Urban Development Authority in the Government of Andhra Pradesh, and Mission Director of JNNURM in the Government of India. These responsibilities gave me insights into many apparently intractable urban issues. My academic background also helped me in applying theory and best practices to address the practical problems of cities. I owe gratitude to my postdoctoral adviser, Prof. Jeffrey Williamson at Harvard University and my doctorate advisers, Prof. Jerry Rothenberg at Massachusetts Institute of Technology, and Prof. John Harris and Prof. Kevin Lang at Boston University. They taught me the importance of theory and empirical research in the design of coherent policies.

    This book would not have been possible without the guidance and contribution by Dr Isher Judge Ahluwalia, who chaired the High Powered Expert Committee on Urban Infrastructure and Services set up by the Ministry of Urban Development, Government of India. I thank Prof. O.P. Mathur, Prof. Sivanand Swamy, and Prof. Chetan Vaidya for their inputs. I also thank Shri D.S. Negi, Ms Kimberly Norhona, and other well-wishers for their support. Last but not the least, I express my sincere thanks to Smita, my wife, for her candid comments on the drafts of several chapters in the book.

    Prasanna K.Mohanty
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    About the Author

    Prasanna K. Mohanty, an officer of the Indian Administrative Service of 1979 batch, is the Chief Secretary to Government of Andhra Pradesh. His academic qualifications include MA in economics, Delhi School of Economics, MA in political economy, and PhD in urban economics from Boston University. He was also a Post-doctoral Fellow at Harvard University.

    Dr Mohanty has held several key positions as an Administrator, including Commissioner of Visakhapatnam and Hyderabad municipal corporations, District Collector and Magistrate, Guntur, Vice-Chairman, Hyderabad Urban Development Authority, Director General, Centre for Good Governance, Hyderabad and Chief Commissioner, Land Administration in Government of Andhra Pradesh and Director, Urban Development, and Mission Director, Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Government of India.

    Combining long research and administrative expertise in the fields of urban economics and city management, Dr Mohanty is known for his contributions to reforms in urban governance and finance in India. He has published several papers which include a seminal study on municipal finances in India sponsored by the Reserve Bank of India.


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