Union Budget 2023-24: Allocations for India’s urban sector

Citizens tend to have huge expectations from the Union  Budget since it has the ability to resolve many of their problems. In India’s budget allocations for 2023-24, it is noted that an amount of INR 764.32 billion has been  assigned for improving various urban sectors, including housing, transport, sanitation, and other infrastructure. This article explains the pattern of sectoral fund allocation and the proposed urban policy reforms. The analysis shows that allocated amounts and limited capabilities of state/local governments might come in the way of resolving various problems faced by the urban population. In the urban sector, the main expenditure heads are establishment, i.e. secretariat, attached offices/autonomous organisations; central sector schemes/projects, namely mass rapid transit systems (MRTS), metro projects, street vendors scheme; and transfers to states/union territories for implementation of various centrally-sponsored schemes, including Prime Minister’s Awas Yojana-Urban (PMAY-U), National Urban Livelihood Mission (NULM), Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Smart Cities, and Swachh Bharat Mission-Urban (SBM (U)). The total net budget allocation for the current fiscal year, i.e. 2023-24, is INR 764.32 billion. In this total, the highest share is of PMAY (U) (33 percent) and MRTS/Metro projects (30 percent), i.e. metro rail, transport planning, capacity building in urban transport, National Capital Region Transport Corporation. Over 60 percent of the total net allocation is to be spent on these two activities.'

The analysis shows that allocated amounts and limited capabilities of state/local governments might come in the way of resolving various problems faced by the urban population.

The remaining allocation is for AMRUT (10.5 percent), Smart Cities (10.5 percent), and other expenditure items. SBM (U) and NULM have received the lowest allocation. Their share in the total net allocation is 6.5 and 1.3 percent respectively. The changes in budget allocation during the last two years are understood by reviewing revised amounts for 2022-23 and budgeted amounts for 2023-24. The data show that there is an overall increase in the amount by nearly 3 percent, i.e. from INR 745.46 billion in 2022-23 to INR 764.32 billion in 2023-24. With regard to various development schemes, it is observed that the highest increase in amount has been for SBM (U) from INR 20 billion to INR 50 billion. This is followed by a 23 percent increase for AMRUT and a 14 percent increase for MRTS/metro projects. The remaining schemes, namely NULM, PMAY (U), and Smart Cities, saw a reduction in the budget amounts, i.e. negative percentages have been recorded. From the above review of budget allocations for the urban sector, the following inferences may be drawn:

• Maximum amounts are allocated for housing and transport.
• The lowest allocations are for livelihood and sanitation.
• In comparison with the previous financial year, a reduction in amount is observed for livelihood, housing, and smart cities.

In her budget speech for 2023-24, India’s Minister of Finance, Nirmala Sitharaman, has called for transforming existing cities into sustainable cities. Accordingly, state and local governments will be assisted in the following manner:

• Financial condition of municipalities will be strengthened through improved collection of municipal taxes and user charges (on municipal services provided). This will allow credit-worthy municipalities to issue bonds.

• An Urban Infrastructure Development Fund (UIDF) will be established for supporting public agencies in strengthening infrastructure in tier 2 and tier 3 cities. It is expected that INR 100 billion per annum will be made available for project implementation.

• In addition, private investment will be sought with the support of existing Infrastructure Finance Secretariat (IFS) for urban infrastructure development.

• As a tax relief measure, development agencies engaged in urban planning and development (including housing) will be entitled to exemption on their income.

• The need for a paradigm change in urban planning is re-emphasised. This is an important practice for guiding future urban growth, which leads to planned development. The proposed measures include improvement of urban planning knowledge, and certified training.

• Three Artificial Intelligence (AI) centres will be established and private expertise will be engaged in the development of AI-based solutions to overcome various urban problems.

• Under the PM Awas (Housing) Yojana, the remaining eligible beneficiaries (from middle- and low-income groups) will be provided houses. For this purpose, approvals related to land and construction will be sought in a timely manner, and adequate capital will be arranged.

• The policy of net-zero carbon emission by 2070 will be pursued with greater vigour. Some measures include the promotion of an environment-conscious lifestyle, transition to a low-carbon economy, and the scrapping of old government vehicles.

• The current practice of manual cleaning of septic tanks and sewers will be replaced with mechanical cleaning/desludging in all urban centres of the country.

• The current practice of waste dumping at landfill sites will be replaced with scientific waste management. One proposal in this regard is the establishment of 75 compressed biogas plants in urban areas, for which fiscal support will be offered for the collection of organic matter (biomass) and bio-manure distribution.

A review of policy proposals for the improvement of urban areas presented above reveals that, during 2023-24, efforts will be made to: Generate more funds, improve the quality of urban planning, utilise emerging technologies, apply anti-pollution measures, overcome implementation barriers, and promote behavioural changes in society.

An Urban Infrastructure Development Fund (UIDF) will be established for supporting public agencies in strengthening infrastructure in tier 2 and tier 3 cities.

The provision of funds for infrastructure upgrading in tier 2 and 3 cities is most appropriate. This transformation will be a boon for populous cities that are under tremendous pressure caused by migration. It, however, needs to be understood why previous efforts in this direction had an insignificant impact and which new measures will be applied to achieve the goal. The highest allocations being given to the housing and transport sectors indicates that the government’s priority during 2023-24 is to provide shelter to remaining communities and address mobility gaps. However, lower allocations for livelihood and sanitation sectors can be a concern. In an urbanising India, the prospects of getting jobs of choice after completing education are low and hence the creation of a range of opportunities is necessary. The only budget provision in this regard is the support of INR 4.68 billion to urban street vendors. In respect of sanitation, particularly waste management, sewerage and drainage, much work remains to be done. Finally, the rationale for allocating INR 764.32 billion for the improvement of India’s urban sector is not clear. Is this amount sufficient for resolving the most important problems associated with urbanisation, such as inferior quality of life in peri-urban areas and census towns,  growing incidents of crime and violence, price rise of essential commodities, or mismanagement of various urban sectors and natural resources, including transport, health, water, land? These are important matters of public concern that need to be addressed.

• Indian Economy
• Urbanisation in India
• India
• Housing
• India
• Infrastructure
• smart cities
• transport
• Union Budget
• urban sector

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