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Modi’s ‘Smart Cities Strategy’ has Potential to Transform India’s
Economy and Competitive Landscape, IHS Report Says
Modi government’s plan to build 100 smart cities could pump more than US$1
Trillion into India’s urban infrastructure.
By 2025, India will have 55 cities with a population exceeding 1 million people.
By 2025, India to have the world’s largest population overtaking China.
SINGAPORE (11 August 2014) – Over the next 15 years, India’s population is projected to increase
by 200 million people, placing tremendous pressure on the country’s urban infrastructure to cope with
this rapid growth. In response, the Modi government announced a programme in July to build 100
smart cities, which has the potential to transform India’s global competitiveness within 10 years and
boost the country’s long-term potential economic growth rate, says the latest analysis from IHS
(NYSE: IHS), a global provider of critical information and insight.
In his Asia Letter titled Can Modi’s ‘Smart Cities Strategy’ Drive India’s Economic Rebound? IHS
Asia-Pacific Chief Economist Rajiv Biswas noted that the total investment associated with the
development of 100 smart cities in India could be far in excess of US$1 trillion with a significant share
of this investment likely to be from foreign government and private sector inflows.
“This is the first comprehensive effort by an India government to upgrade India’s urban infrastructure
across the country,” Biswas says. “The development of India smart cities with modern, highly efficient
infrastructure for electricity, transport and IT, will create a new competitive landscape for the
subcontinent that will be much more attractive for foreign direct investments by global multinationals.
“The potential economic impact effects from the development of India’s smart cities development will
act as a significant catalyst for economic growth through a number of drivers, including increased FDI
inflows, accelerated REITs (Real Estate Investment Trusts) development, increased competitiveness,
and job creation.”
Modi’s track record of infrastructure development while he served as chief minister of Gujarat
demonstrates his commitment to implementing such infrastructure projects and attracting foreign
investment inflows, says Biswas in his Asia Letter. For example, he notes, one smart city planned
during that time that is already under construction is Gujarat International Finance Tec-City (GIFT)
which is designed to be an international financial services and technology hub.
The estimated total investment for the Delhi Mumbai Industrial Corridor (DIMC) project (US$90 billion)
and the GIFT smart city (US$10 billion) together amount to US$100 billion, so the total investment
associated with the development of 100 smart cities in India could be far in excess of US$1 trillion. A
significant share of this investment is likely to be from foreign government and private sector
“If his BJP-led government can successfully roll out the smart cites programme across India, it could
significantly improve India’s potential growth rate, boost the country’s international competitiveness,
and generate millions of new jobs over the next decade,” Biswas says.
Although until now India has lagged far behind other Asian industrial economies, such as China and
South Korea, in developing smart cities, these new projects are already creating initial momentum for
smart city infrastructure development in India, says the report.
India smart city projects include:
Under construction is GIFT designed to be an international financial services and technology hub.
Dholera Special Industrial Region located in the DIMC with US$90 billion in projected investment
as a joint Indo-Japanese project with a 26% equity stake from the Japanese Bank for International
Co-operation in the DIMC Development Corporation.
Singapore’s Ascendas India Development Trust with Japan’s Mizuho Corporate Bank and JGC
Corporation have signed an memorandum of understanding with the government of Tamil Nadu to
build a smart city (integrated township) 50kms south of Chennai for Japanese industrial firms such
as automakers and electronics firms.