Cities without a core

The Indian economy has grown rapidly since 2003-04, but

there has not been a corresponding evolution of vibrant
metropolitan regions.

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Written by Isher Judge Ahluwalia | Updated: M ay 25, 2016 12:21 pm

An important reason for this is restrictive land use policies, including very low
FSI (Floor-Space Index) regulations, and stringent building regulations in the
cities.

The discussion on urbanisation in India has focused largely on the need for
infrastructure development and how to fund it. In my last article, I had highlighted
the importance of greater empowerment of cities with effective transfer of functions
and greater devolution of funds to ensure better service delivery. But urbanisation in
the context of rapid economic growth poses an additional challenge of metropolitan
development, which cuts across cities and is rarely discussed.

A metropolitan region is an economic construct which can be thought of as a

primary city forming the core of the region and adjacent cities and towns connecting
with it. This forms a unified market covering several cities, towns and surrounding
areas. It reinforces the agglomeration economies which arise from localisation,
urbanisation and networking. These economies lead to productivity gains and cost-
saving in the movement of goods, people, ideas and knowledge. The geographical
boundaries of the region change as the economy changes.

Metropolitan regions play an important role in fostering connectivity and

competitiveness. The metropolitan regions of Mumbai, Chennai, Bangalore,
Kolkata and Hyderabad together contribute 11 per cent to the GDP of the country.
Mumbai and Bangalore metropolitan regions contribute 35 per cent and 38 per
cent to the respective state GDPs. However, an institutional structure that can
provide metropolitan governance is missing.

Metropolitan regions in India are being generated by default through economic

forces, and not by design through supportive government policies. As a result, they
do not benefit as much as they could from the expected benefits of agglomeration.
For example, these regions suffer from utter lack of transport infrastructure which
constrains them from exploiting agglomeration and network economies for growth.

The 74th Constitutional Amendment provides a framework for metropolitan

planning and development for the provision of infrastructure development,
environmental conservation, spatial planning and sharing or pooling of resources.
But the Metropolitan Planning Committees (MPCs), for preparing draft
development plans, have been set up only in a few states, and even there, they have
not been operationalised. If the chief minister of a state were to head the MPC in
the state, it should make a difference. Metropolitan regions are, in effect, de facto
entities somewhere between the state and local governments. Although
considerable discretion is given to state governments in determining the
administrative boundaries of metropolitan regions, these have typically not been set
keeping in mind the need to create a unified market forging strong economic
linkages between the core city and the periphery.

The 74th Constitutional Amendment also has no provision for planning and
development of metropolitan regions which involve spillovers beyond state
boundaries. Thus, if Ghaziabad, Noida and Gurgaon are part of the National
Capital Region (NCR), the NCR Planning Board has no teeth in planning and
implementing a connectivity plan for these cities with Delhi. If these cities were
empowered with functions and funding, they could choose to come together and
allocate funds to reap benefits from greater connectivity within the metropolitan
region. But the state governments to which they belong may have different
priorities.

It is no surprise, therefore, that although the Indian economy has grown rapidly
since 2003-04, there has not been a corresponding evolution of vibrant
metropolitan regions. Essentially, India’s rapid economic growth has been
associated with premature industrial suburbanisation. Manufacturing is relocating to
the suburbs before being able to harness the potential of agglomeration economies.
International experience suggests that metropolitan concentration typically increases
until per capita income reaches $ 7000 — $10,000. In India, metropolitan de-
concentration has happened at a much earlier stage of development (Urbanisation
beyond Municipal Boundaries, World Bank 2013) .

An important reason for this is highly restrictive land use policies, including very low
FSI (Floor-Space Index) regulations, and stringent building regulations in the cities
which prevent redevelopment of the core of the city and push out investors,
workers and those in search of housing. The result is that development has tended
to sprawl outside city limits. High transaction cost of doing business in the formal
sector also pushes investments in the informal sector. The peripheral towns and
villages are crying for infrastructure in the face of the spillovers of growth, while
connectivity of the periphery to the core remains weak. We have seen land scams,
real estate development scams, and haphazard spatial footprint of rapid economic
growth.
And yet it is clear that there are large dividends that can be harnessed and nurtured
through metropolitan and regional planning and development. For example, land
use planning in Delhi has been with the DDA (Delhi Development Authority), while
the DMRC (Delhi Metro Rail Corporation) has been planning and implementing
mass rapid transit for the past several years. The two came together in a framework
of integrated land use and transport planning when about six years ago, the DDA
made a grant of Rs 700 crore to DMRC for the metro line to Dwarka. The
commissioning of this line has reduced commuting time from Dwarka to Central
Secretariat in Delhi from one and a half hours by road to less than 30 minutes. On a
larger scale, in an initiative to promote strategic densification of transit nodes, the
Transit-oriented Development Policy was notified by the Union ministry of urban
development in July 2015 and the rules are expected to be notified soon. This
should have a salutary effect on the ability of the region to realise its growth
potential.

Financing for metropolitan development will have to rely on unlocking land value
through instruments such as impact fee and tax increment financing. Since the costs
and benefits of infrastructure development are not equally distributed within the
region, cooperative financing arrangements will have to be devised within the
federal framework with active engagement of the cities and towns in the region.

Externalities in the case of transport connectivity are very obvious. But even in
other areas such as landfills or waste to energy plants for solid waste management
or water and sewerage provision for small urban local bodies, scale economies can
be reaped by operating at the metropolitan region level. An example of a successful
case of inter-municipal cooperation is the STEM Water Authority, set up and
managed by the Thane Municipal Corporation, Mira-Bhayander Municipal
Corporation and Bhiwandi-Nizampur Municipal Corporation together with 34
villages in the Thane district. The authority operates and maintains the Shahad
Themgar Water Works and supplies water to the urban local bodies and the
villages.

It is clear that only when cities are empowered innovative and cooperative solutions
will emerge to address the metropolitan development challenge that India faces in
the years ahead. The solution will depend on what it takes to resolve the political
tension between the corporator and the MLA for power-sharing.

The writer is chairperson, ICRIER, and former chairperson, High Powered Expert
Committee on Urban Infrastructure and Services.