This PPT delivered to Scholars of Indian School of Public Policy discusses legislative, policy and financial problems and issues associated with Indian Urban Sector / Urbanisation.

1. PROBLEMS AND ISSUES WITH INDIAN URBANIZATION
PRESENTATION TO INDIAN SCHOOL OF PUBLIC POLICY SCHOLARS
By Ravikant Joshi

2. PROBLEMS AND ISSUES WITH INDIAN URBANIZATION
1. Constitutional – legal status of urban local governments
2. Absence of Urban Policy
3. Hidden – Skewed Urbanization
4. Stagnant and miniscule share of urban finance in economy
5. Urban Poverty, Job Creation and Skill Development
6. Inadequate basic urban infrastructure – water, sewerage, solid waste, road, street light
7. Lack of Affordable Housing, Slum Upgradation, Slum Redevelopment
8. Inadequate Transportation A ccess – last mile connectivity
9. Inadequate attention Sustainable Development, Climate Change, Social Inclusion,
10. Lack of Institutional Capacity
11. Archaic - reactive Urban Planning / absence of local economic planning
12. Very weak Demand Side

3. CONSTITUTIONAL – LEGAL STATUS OF URBAN LOCAL GOVERNMENTS
India has adopted federal structure
Three lists in Indian Constitution – central, state and concurrent
There exists post 73 & 74th CAA a three tier government structure
– center, state and local
Local government forms part of ‘state lists’, (Item 5 of the List II of
VII Schedule) so state governments has complete prerogative over
local bodies
Urban Local Governments are one way starting points of Indian
National Freedom movement

4. HISTORY OF MUNICIPAL SYSTEM
Current municipal system in India is the legacy of colonial
administration in British pattern with following periodical evolutions:
 1687-1881 : Local Government was utilized to ease central and provincial
finances and thus sub serve imperial needs.
 1882-1919 : Local Government began to be viewed as self government.
 1920-1937 - : Local Government came within the jurisdiction of provinces and
further, was transferred to popular control.
 1938-1949 Local Government was in a State of repair and reconstruction.
 1950-1994 Local Governments mainly urban missed due place in the
Constitution
 1994 onward Political existence ensured, women and reserved categories got
reservation, improved devolution but it is still a state subject and not
empowered in terms of functions and fiscal resources

5. SITUATION PRIOR TO 74TH CONSTITUTIONAL AMENDMENT
In the Constitution of India prior to the enactment of 74th
Amendment, there was only one provision under article 40 of the
Constitution of India, which deals with the organisation of village
panchayats.
This was in the shape of Directive Principles of State Policy and
read as, "The State shall take steps to organize village panchayats and endow
them with such powers and authority as may be necessary to enable them to
functions as units of self Government“
But no mention of urban self-governing institutions except by way
of Entry No.3 of the 7th schedule in the constitution.

6. SITUATION PRIOR TO THE 74TH CAA
Various decentralisation initiatives to make ULBs and PRIs
institutions of self governance were taken but failed
Two main reasons for their failure
 Structure of Indian Constitution – three lists
 State governments’ refusal to part with functions, powers, and
finances to ULBs & PRIs
Prior to CAA most local government institutions were either
routinely superseded or elections were not held timely,
resulting in complete subversion of the system of local
governance.

7. THE 74TH CONSTITUTIONAL AMENDMENT ACT
Visualised ULBs as Institutions of Self-governance with the
capability to prepare 'plans for economic development and
social justice'.
Introduced unified three tier structure based on population,
function and economic base
Put an end to State Government’s discretion to constitute or not
to constitute ULB
Representation to women, SC/ST/OBC groups
Introduced 12th Schedule regarding functions which may be
transferred to ULBs

8. THE 74TH CONSTITUTIONAL AMENDMENT ACT
Democratic Decentralisation: constitution of Ward Committees
with representation from women, citizens' groups, SC/ STs etc. in
cities with a population of over 0.3 million. For lower level of
ULBs, the State Government can decide. To bring governance
closer to the people and could be empowered to carry out the
responsibilities of the ULB including the XII Schedule
District and Metropolitan Planning Committees: To effect
spatial and economic development, and rural and urban
planning, with majority representation of elected local
representatives.

9. THE 74TH CONSTITUTIONAL AMENDMENT ACT
State Finance Commission: To ensure financial stability of
ULBs, a State Finance Commission (SFCs) to be constituted
every five years. Based upon the recommendations of SFC,
the Central Finance Commission to suggest measures for
augmenting the consolidated funds in a state, for
supplementing the resources of municipalities
State Election Commission: To ensure a democratic process,
the act mandates the creation of State Election Commissions
(SECs). Another key task of the SECs is to ensure that election
to municipalities dissolved by the state government, be held
within 6 months of the dissolution.

10. THE 74TH CONSTITUTIONAL AMENDMENT ACT CRITICAL ISSUES
In nut shell what has happened is a political decentralisation
More than 60000 elected representatives assumed role in 15
states but no provision for their training
Political decentralisation is not backed by financial devolution
and functional autonomy
The 12th Schedule pertaining to functions is not mandated
State’s absolute power to determine functional and fiscal
domain of ULBs remained as it is

11. THE 74TH CONSTITUTIONAL AMENDMENT ACT - CRITICAL ISSUES
No criteria for seat reservation - possibility of political
victimisation
States have not created ward committees
Those who have created has not given financial powers to these
committees or has clubbed several wards to form a single
committee
Rotation and short term of Mayor and other functionaries
Delay in SFC constitution and non implementation of their
recommendation
Very few States have provided for DPC and MPC

12. IMPLEMENTATION OF THE 74TH CONSTITUTIONAL
AMENDMENT ACT - SUMMARY
Has only ensured existence of ULBs
Political Decentralisation but without empowerment
Only silver lining is there is no reversal of a democratic
situation

13. NATIONAL URBAN POLICY FRAMEWORK
The vision, the philosophy, the action plan suggested by
NUPF is ambitious and has really many desirable features
/ concepts, but it is not holistic
Replacing a view of cities as ‘machines for living’ with one
that sees them as evolving ecosystems.
The ten sutras are applied to ten functional areas of urban
space and management.

14. NATIONAL URBAN
POLICY
FRAMEWORK
PHILOSOPHICAL
SUTRAS AND URBAN
FUNCTIONS
Philosophical Sutras
1: Cities are Clusters of Human Capital
2: Cities require a ‘Sense of Place’
3: Not static Master Plans but evolving
Ecosystems
4: Built for Density
5: Public Spaces that encourage Social
Interaction
6: Multi-modal Public Transport Backbone
7: Environmental Sustainability
8: Financially Self-Reliant
9: Cities require Clear, Unified Leadership
10: Cities as Engines of Regional Growth
Urban Functional Areas
1. City Planning (3,4,5)
2. Urban Economy (1, 9, 10)
3. Physical Infrastructure (1,5,7,8,9)
4. Social Infrastructure (1,2,9)
5. Housing and Affordability (3,4,8)
6. Transportation and Mobility (6,9)
7. Urban Finance (7,8,9)
8. Urban Governance (1,9)
9. Urban and Information System (3,5,7,9)
10. Environmental Sustainability (7,9)
NATIONAL URBAN POLICY FRAMEWORK

15. WHAT IS MISSING IN NUPF?
Three main aspect / philosophical sutras are missing
 1. City for All or Inclusive City or Cities as Centers of Poverty Alleviation
- our cities are exclusionary - temporary migrants / seasonal migrants neither
consider city as their city nor city considers temporary migrant as its citizens.
 2. City as a Centre of Participatory Democracy - Democratic
Decentralization - No taking forward spirit of 74th constitutional amendment
and also world view on this
 3. Right to City as a guiding principle: Right to City has emerged as
guiding principle in most international documents. NUPF hesitates to
elaborate India’s approach except in a single line.

16. WHAT NEED TO CHANGE IN NUPF?
Sutra 8 - Financial Self Reliant - Sutra is correct but its articulation is not
correct – need to be redrafted
 Amendment of constitution to give separate list - Local List which many commissions -
experts have recommended is not mentioned in the sutra but it is mentioned in 10
Functions which are associated with these 10 Sutras.
 Function 7 - Urban Finance mentions separate local list for ULBs in constitution but in Sutras it is not mentioned.
 Financial Self Reliance will come only when ULBs are empowered with sufficient
and broad-based tax resources
 ULBs have not optimized whatever limited resources they have is a fact, but it is also a fact that with only one
tax that is property tax and water - sewerage - solid waste charges even if increased five-fold or efficiency
is increased manifold ULBs will not become self sufficient.
 Sutra wrongly mentions Municipal Bonds, but they are not going to make ULBs financially self reliant.
Sutra 4 – Built for Densities
 This will have to be calibrated

17. IMPLEMENTING NUPF
At present, the capacity of Indian State particularly of ULBs to
deliver NUPF is very limited because it is not accustomed with many
of philosophical sutras / principles on which NUPF is premised for
example -
 1: Cities are Clusters of Human Capital
 2: Cities require a ‘Sense of Place’
 8: Financially Self-Reliant
 9: Cities require Clear, Unified Leadership

18. NUPF FOR POST COVID 19 SITUATION
As a blessings in disguise COVID 19 has brought to fore ‘how exclusive are our cities’ and
has removed cloak of invisibility of circular or seasonal migrants.
Most of us including policy makers lacked knowledge about their existence in our cities and
problems faced by them. Look at their desperation to leave cities at any cost and without
expecting anything from any government as they have not been getting anything from city.
Before they return again back to Cities, each city to start with must have migrant worker
facilitation center – which will act as a one stop solution for their problem.
Cities need to provide them decent rental housing solution, access to basic urban services
including transport and health.
Need to work out their coverage under safety net and welfare schemes, if they are not
available then special schemes should be created for migrant workers.

19. HIDDEN – SKEWED URBANIZATION
The urban population of India has increased from 25.85 million in 1901 to 377.11
million in 2011. (31.28%)
Currently at 34% in 2017 according to The World Bank,
Expected to reach 600 million by 2030,
It is skewed – some states are highly urbanised above 45% while some less than
20%. 55 metropolitan areas constitute more than 40% population.
130 cities above 5 lac population – 500 cities are having 1 lac population – 1000
cities above 50000 population – 3000 cities having less than 50000 population.
Till 2050 absolute growth in urban population is going to be India across the world.
Till date urbanization growth rate is not the way it should be, it is on slower side.
Seventy per cent of future employment is expected to be generated in Indian cities,
With 70% of India’s built environment for 2030 yet to take shape, its impending urban
transformation also represents significant opportunities for domestic and
international investments.

20. CURRENT ISSUES IN INDIAN URBAN FINANCE
1. Miniscule and stagnant share of Municipal Finance in GDP at 1 % of GDP for past 20 years
2. Investment in urban infrastructure stagnant at 0.6 to 0.7 of GDP during 2011-18
3. Shrinking space of Urban Local Bodies’ Finance /Municipal Finance –
A. Cities are increasingly financed through national resources (grants and transfers) than locally
raised resources – shrinking of financial decentralisation
B. Declining share of Municipal Own Source Revenue
4. Skewed state of urban finance across the States
5. ULBs are not augmenting their own sources
6. ULBs are not creditworthy – lack capacity to borrow
7. ULBs are not leveraging their own sources- debt financing by ULBs is marginal
8. Inability of ULBs to absorb the funds – Inability to devolve the funds
9. Negligible Role of PPP in municipal finance
10. Absence of Financial Accountability (FRBM) & Sustainability Framework
11. Narrative of Centralisation, tide – project based devolution with soft budgetary constraints
12. Impact of GST not remedied
13. Land Value Capture – overrated, constrained

21. MUNICIPAL FINANCES IN INDIA – PERENNIAL ISSUES
Inferior nature of local taxes
Inadequate local resources in the hands of Municipal Bodies
Inroads by state governments on local resources
Absence of autonomy with local bodies in respect of tax rate
setting, rate revision and other spheres of working
Inadequate devolutions, transfers, grant-in-aids
Failure of SFC to revamp municipal finances

22. MUNICIPAL FINANCES IN INDIA – PERENNIAL ISSUES
Poor administration in all respect of tax and other
powers
Non-augmentation of non-tax resource
Inadequate borrowing powers and options
Inefficient management of municipal resources, cost
inefficiency
Rudimentary and weak financial administration, budget
making
Lack of professional capabilities

23. CITIES, LIKE STATES, MUST COMPETE WITH EACH OTHER TO UNLEASH DYNAMISM. TO
COMPETITIVE FEDERALISM INDIA MUST ADD COMPETITIVE SUB-FEDERALISM.
CITIES THAT ARE ENTRUSTED WITH RESPONSIBILITIES, EMPOWERED WITH RESOURCES, AND
ENCUMBERED BY ACCOUNTABILITY CAN BECOME EFFECTIVE VEHICLES FOR UNLEASHING
DYNAMISM SO THAT TO COMPETITIVE FEDERALISM INDIA CAN ADD, AND RELY ON, COMPETITIVE
SUB-FEDERALISM. ECONOMIC SURVEY OF INDIA 2017
UNFORTUNATELY LEGAL STRUCTURE, URBAN POLICY AND FUNCTIONAL – FISCAL DEVOLUTION
HAS FAILED TO ACHIEVED THIS VISION.

24. THANK YOU Dr. Ravikant Joshi