At the very outset, the Finance Minister clearly recognises that since urban development is constitutionally a state subject, progress in the urban field is subject to taking the states along
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This essay is part of the series "Budget 2024-25"
This year, on 1 February 2024, India’s Finance Minister (FM) was constrained to present merely a ‘vote on account’. That interim budget was riveted on highlighting the past achievements of the government. This was so given the approaching national elections scheduled for April-June 2024. Now that the polls have been conducted and a government has been formed, the FM has presented a proper, comprehensive budget for 2024-25. This budget, presented on 23 July 2024, was the FM’s seventh budget in her unbroken series of seven national budgets. It has laid out the government’s principal financial and policy decisions and outlays for her many proposals. This article analyses the budget proposals for urban development.
Of the nine priority areas in this year’s budget presented by the FM, priority 5 is urban development. Paragraphs 64 to 71 of the Budget speech deal with seven different urban areas.
Of the nine priority areas in this year’s budget presented by the FM, priority 5 is urban development. Paragraphs 64 to 71 of the Budget speech deal with seven different urban areas. These comprise cities as growth hubs; creative redevelopment of cities; transit-oriented development; urban and rental housing; water supply, sewerage and sanitation; street markets; and stamp duty. At the very outset, the FM recognises the necessity of working in partnership with the states, clearly recognising that since urban development is constitutionally a state subject, progress in the urban field is subject to taking the states along.
The Budget first proposes to develop cities as growth hubs. It hopes to facilitate this through economic and transit planning and orderly development of peri-urban areas using town planning schemes. There is a clear strategy to push for greater urbanisation by paying more attention to peri-urban areas and comprehensively urbanising them using town planning schemes (TPS) that use the twin concepts of betterment and compensation. TPS—an excellent tool for urban development, extensively used by Gujarat—also satisfies the strategy to internally generate much of the revenue required for developing such areas. There evidently would be two ways to deal with the future of such developed peri-urban areas for governance. They would merge with neighbouring urban local bodies (ULBs) or be established as new and independent municipalities.
The second zone of attention is the redevelopment of existing and old urban areas that have atrophied and need to be rebuilt. Here, the Budget proposes to formulate a framework for enabling policies, market-based mechanisms, and regulation for their development. This aspect of urban redevelopment is in the making, and we shall have to await the results of the exercise that the Government of India (GoI) will undertake on the related policy and regulation.
The second zone of attention is the redevelopment of existing and old urban areas that have atrophied and need to be rebuilt. Here, the Budget proposes to formulate a framework for enabling policies, market-based mechanisms, and regulation for their development.
The third urban aspect relates to transit-oriented development (TOD). As mentioned in some of her earlier Budgets, this has been a subject of particular interest for the FM. She now proposes to take TOD to 14 large cities with populations above three million. TOD plans will be formulated for all these cities accompanied by a financing and implementation strategy. This proposal needs further scrutiny regarding the feasibility of the cities selected for transit-oriented development.
The fourth area of focus is urban housing. The Budget mentions an investment of INR 10 lakh crore spread over the next five years under the PM Awas Yojana 2.0 to provide housing to 10 million poor and middle-class families. While the Centre would pitch in with INR 2.2 lakh crores, other stakeholders will share the rest, along with the provision of interest subsidies to enable affordable debt. Additionally, the FM hopes to introduce policies and regulations for rental housing to increase housing stock availability in cities.
The fifth subject of attention under urban development is water supply and sanitation. Through bankable projects, the GoI, state governments, and multilateral development banks will partner to promote water supply, sewage treatment, and solid waste management projects and services for 100 large cities. The recycling of treated water for irrigation and its use to fill deficient water bodies are also envisaged.
The sixth subject selected by the FM is the informal sector of street vendors and street markets in cities. Buoyed by the success of the PM SVANidhi Scheme, which significantly contributed to the earnings of the street vendors, the FM proposes to fashion a new scheme that would be supported for the next five years. This would be the development of 100 weekly ‘haats’ or street food hubs in select cities.
The last urban component is to target high stamp duty charged by certain states and to work with them to moderate these in the interest of the overall health of their own and the national economy. This has been attempted since the days of JNNURM (Jawaharlal Nehru National Urban Renewal Mission). The Mission targeted a reduction of stamp duty as a mandatory reform for states to access JNNUTM funds. However, this time, the FM has added one more component—lowering stamp duty more than the general amount for properties that are purchased by women. Just as in JNNURM, reducing stamp duty is sought to be made a conditionality for states to receive finances from the cited urban development kitty for schemes proposed by the FM in the Budget.
There are other provisions of the budget outside paragraphs 64 to 71 that have indirect or direct relevance for cities. Examples of these are the provision for larger participation of women in the workforce through the setting up of women’s hostels, the outlay for the scheme for higher education loans and several infrastructure projects, and employment schemes and tourism provisions, specifically for the cities of Gaya, Bodhgaya and Rajgir. The INR 15,000 crore debt for the development of Amravati directly contributes to urban growth. So is the proposal for digitising urban land records and property tax administration. Although primarily outside the urban local body domain, these outlays will positively impact the city economy, city services and quality of life.
There are other provisions of the budget outside paragraphs 64 to 71 that have indirect or direct relevance for cities. Examples of these are the provision for larger participation of women in the workforce.
Of the various proposals for urban development outlined in the Budget, some may have smooth sailing as they will find ready support from the states. PM Aawas Yojana should succeed in small and medium towns but may struggle in larger cities due to difficulties locating adequate land for their construction. Water supply, sewerage treatment, and solid waste management are top priorities across most cities and states. They would look favourably at central assistance and be ready to chip in with their share. The street market proposal enjoys excellent popularity and should be lapped up by cities. Several others may, however, receive tepid reception from the states. They seek to significantly intrude into the area of urban planning, a domain where states have been chary of allowing dictations from outside. Apart from the turf question, there may even be conceptual incompatibilities with the states with which GoI may have to contend. The model rental laws proposed earlier by GoI have not had wide acceptance, and past central attempts to get the states to reduce stamp duty have been met with resistance. We also need to recall that the National Budget for 2022-23 sought to provide a significant thrust to urban planning. The budget envisaged that cities should be re-imagined as centres of sustainable and inclusive living with opportunities for all. It found much that was amiss with urban planning and was convinced that urban planning cannot continue with a business-as-usual approach. However, no major dent is visible in how cities are fashioned.
Furthermore, much of the money for urban development depends on the market and self-generating mechanisms. It would have to be seen how states react to such proposals. States are sure to weigh the gains that accrue to them by undertaking projects advised by the Centre. Overall, the Budget sidesteps the primary urban reform agenda left substantially incomplete by the 74th Constitutional Amendment Act. We will have to wait till the Centre finally decides to bell the cat and force the pace of fundamental urban reforms.
Ramanath Jha is a Distinguished Fellow at the Observer Research Foundation.
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Dr. Ramanath Jha is Distinguished Fellow at Observer Research Foundation, Mumbai. He works on urbanisation — urban sustainability, urban governance and urban planning. Dr. Jha belongs ...
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