Budgeting and urban planning

Nirmala Sitharaman, Union Finance Minister, presented the Union Budget 2023-24. Over the last three years, it has been distinguished by areas of continuity. However, while celebrating continuity, we must not overlook missed opportunities for more fundamental reforms.

Concentration areas

  • Some issues, such as the continued increase in capital expenditure, have received widespread attention. Others, such as urban development and planning reform, have received less attention.
  • The quality of urbanisation will determine the quality of economic growth as India grows, and vice versa.
  • From this vantage point, the continued emphasis on improving urban infrastructure and land-use efficiency is encouraging.

Proposals for urban planning and development

  • Cities will be encouraged to implement urban planning reforms, such as adopting practises that use land more efficiently, creating resources for urban infrastructure, making urban land affordable, and improving inclusivity.
  • Infrastructure financing: Cities will be incentivized to ring-fence infrastructure user charges and implement property tax governance reforms in order to be creditworthy enough to issue municipal bonds.
  • Infrastructure Development Fund for Cities in Tiers 2 and 3: Shortfalls in priority sector lending will be used to create infrastructure in Tier 2 and Tier 3 cities, resulting in the creation of a fund. This fund is expected to receive Rs 10,000 crore in funding. States will be expected to levy fees for access to these resources.
  • Improving sewage and waste management: Proposals for infrastructure improvements to handle sewage and waste.

Proposals from the previous budget were carried over.

  • The budget for 2021-22 prioritised urban infrastructure, public transportation, waste management, and universal water supply.
  • The budget for 2020-21, like this year’s, proposed improvements in sewage treatment and waste management to eliminate the need for manual cleaning.
  • It proposed tax breaks to encourage foreign borrowing for certain municipal bonds. To promote rental housing, the government announced and then drafted a model tenancy law in 2019.

What more can be done?

Shift towards market-oriented reforms in urban planning and development:

  • States and city governments have come around to the benefits of market-oriented reforms, removing some of the need for the Centre to champion them. This could be driven by the emergence of cities as growth engines, the resulting commodification of urban land markets, and, as a result, a greater emphasis on land-use efficiency.
  • Greater intellectual openness to new ideas in urban planning may also be driven by changes in the perspectives of professionals in the field, such as urban planners, architects, and administrators, who are increasingly able to work directly with state and municipal governments.
  • Lack of Political Significance for Urban Governance Reforms: While cities are becoming more economically significant, they may not yet be politically significant enough for politicians to take urban governance issues seriously.
  • While the 73rd and 74th amendments devolved many powers to local governments, state governments still hold the majority of the aces. This could change dramatically as India transitions from rural to urban areas.

@the end

While urban governance systems are improving, India’s cities continue to face issues that require fundamental changes. Our building codes, land use restrictions, and zoning continue to create inefficiencies that make our cities unaffordable, dirty, and polluted. The government’s efforts to strengthen capacity and form expert committees to propose reforms in these areas are commendable. However, the pace of these proposals is insufficient, and they must be prioritised in order to meet the challenges of urban India.

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