By Mohitkumar Daga, The writer is an independent public policy consultant
The distance between Kanpur and Koramangala, or Asansol and Ahmedabad, or even Guntur and Gurgaon is more than geographic. The top industrial cities of yesteryear have seen their prosperity erode significantly, while the urban bigwigs of our times have neatly aligned themselves with changes in the Indian economy. The comparative economic fortunes of these urban centres can partially be explained through lenses like divergences in the industrial bases, infrastructure, human resources, political temperaments, etc. However, the fundamental lesson is that cities respond and adapt differently to changing economic conditions and policies must accommodate this fact. India’s economic strategies till now, however, have been hesitant to accord much importance to this intuitive lesson.
Throughout human history, cities have been the fount of economic prosperity. As the key loci of economic activity, mediators between urban and rural economies, dense hosts of labour and consumers, and portals for global interactions, cities play an instrumental role in shaping the economy. They are also impacted more quickly and severely by a nation’s economic circumstances. The economic importance of cities was well-encapsulated by the National Commission on Urbanisation’s seminal 1988 report which called cities the “heroic engines of growth”. This ringing acknowledgement notwithstanding, India’s cities have either been taken for granted or more often ignored in its economic policymaking.
At the root of this critical exclusion has been the structural concentration of economic policymaking at higher levels of government that provides macro-solutions, reasonable in aggregate but lacking the finesse to address the differential impact on diverse urban contexts. Economic policies may shift the geographic concentration of employment but their impact on a city’s carrying capacity is hardly contemplated. Many factors influencing the economic choices made by businesses and workers lie within the remit of urban local governments. Yet, there is limited space for cities in the decision-making on economics. Congestion and commute times are considerations for business investment, while workers look for amenities in making employment decisions. An “upward creep” of economic decision-making is also apparent in instances where levers (like property taxes or development regulations) within the statutory powers of city governments are set through state-wide, industry-specific promotion policies.
In the absence of any formal mechanism to integrate cities into economic decision-making, policymakers may be missing out on the potential of urban planning, tailored infrastructure, and community action to shape economic activity in support of broader priorities. Interestingly, Article 243W of the Constitution inserted by the 74th amendment provides for “preparation of plans for economic development and social justice” as one of the key areas for “devolution of powers and responsibilities” to urban local bodies. However, the scope and implications of what this “economic and social planning” role contemplates has remained undefined till now.
The place for cities in economic development has also remained limited due to constraints of intent, capabilities, and information at the local level. For long, the function of urban governments has been narrowly perceived to be “urban service provision” embedding a deep “amenities bias” among all stakeholders, including the citizenry. Nobody expects urban governments to do much beyond provision of services, and, consequently, they do little else. With such constrained expectations, the municipal bureaucracy and political executive have little incentive to forge a deliberate economic role for their city. Further, the lack of capacity on these issues within the city government, especially the planning wings, confines the involvement of cities in economic decision-making. City-disaggregated economic data is also scarcely available to enable them to make informed decisions.
Globally, cities participate in economic decision-making through institutional arrangements like regional development organisations or mechanisms like city deals/contracts, etc. Concepts like local economic development and place-based policies also provide a template for city participation in shaping their local economies. While the outcomes of these experiences have been mixed, the voice of cities in their economic destiny is normatively important.
In India, during the competitive phase of the Smart Cities Mission (SCM), the proposal guidelines called for establishing a linkage with economic aspects, with some cities including projects related to employment and start-ups. However, the economic dimension under SCM was mostly episodic with only a limited assessment or envisioning of the economics of the respective cities. Some recent policy documents like the National Urban Policy Framework and the report of the high-level committee on urban planning have underlined the importance of creating an economic role for cities. Building on these, the government should actively consider measures to better articulate and underscore this role of cities and create the required institutional framework and capabilities through statutory mandates and fiscal incentives. The recent Union Budget proposal for a `1-lakh crore “Urban Challenge Fund” provides an opportune vehicle to leverage the economic aspects in India’s urban landscape.
Cities, if included and employed effectively, can prove to be force multipliers for India’s economic trajectory.
