Urban development must shed masterplan system

After Independence, urbanisation was dovetailed with industrialisation. As a result, cities continued to remain isolated centres of economic activity, with weak linkages to the hinterlands, and failed to optimally utilise the natural and human resources of the region they were located in. Cities were unable to expand and assume economic functions, transcending regional boundaries. In contrast, nations where urbanisation drove growth by expanding the economic base and productivity of cities saw rapid industry-led growth.

In the Indian context, there has been some change after the liberalisation of the 1990s. Cities have spurred growth in surrounding settlements, creating urban agglomerations or city-regions. This has involved diffusion of market, jobs, production, technology, and investments into the larger space, with two effects: The city becomes a “growth pole” for the region, and there is an emergence of a network of smaller cities in the surrounding space.

Thus, the rise of metro city-regions as Growth Hubs (GHs). The metro cities had relatively better physical infrastructure, which could be upgraded at a lower cost for use by the entire region, as compared to developing new infrastructure elsewhere. Also, increased employment opportunities created by service-led economic growth attract unskilled, skilled and knowledge workers into the region. Direct access to such a large pool of workers created a “thick labour market” and businesses easily found the workers they needed locally, thereby reducing costly delays in staffing.

The concentration of workers in the city-region, therefore, had a major productivity-enhancing effect for firms and income-raising effects for workers. Enhanced economic activity also led to a large number of suppliers of intermediate goods and services. Availability of specialised input goods and service suppliers within the region minimised transaction and transportation costs. Businesses were able to carry minimum inventories, which freed up funds for innovation and product development.

In turn, intermediate goods suppliers were able to achieve scale economies, by supplying to a large number of firms in the region. Complementary product manufacturers developed within the region. Nearly all metro cities had the initial advantage of having PSUs, public universities and research organisations. Finally, the presence of several firms selling near-similar products to the global market led to improved quality and innovation. Operating under similar conditions spurred competition and drove the focus on quality.

Importantly, the city-as-a-growth-hub concept that was announced in the 2024 Union budget received support through a challenge fund in the current financial year. The country had 474 urban agglomerations (UAs) in 2011, accounting for about 92% of the urban population within a radius of 50 km. These UAs, some of which have emerged organically, while others are planned and still others remain to be developed, could be developed as GHs, albeit in a graded manner, even as some get subsumed under even larger GHs as satellite cities. The challenge is, however, to plan for a mix of land use, lack of complete transport networks, fragmented water supply, sewerage and solid waste management and, most important, generate revenues to do all this. To ensure that GHs are able to meet their economic and employment generation potential, the following advance actions would be essential.

First, more dynamic, iterative and adaptive planning is required, drawing on the experiences of Japanese land-use planning, Gujarat and Maharashtra’s land pooling mechanisms and rethinking building rules to cater for the needs of IT companies as well as multi-storeyed housing for the increasing number of workers, managers and knowledge workers, among others. This needs to replace the current planning systems consisting of preparation of master plans (also known as development plans) that lay down rigid land-use, zoning and development controls for relatively long time periods, even though they are largely disconnected from rapidly changing socio-economic conditions and investment planning.

Second, planning for road networks and transport provision are needed along with plans for water supply, sewerage, recycling water, and so on in a way that traffic congestion is avoided, adequate drinking water is available, sewerage lines are laid, and water is conserved and recycled. The increase in associated land values need to fund these developments by value capture. Some potential tools are: Impact fee due to road development, betterment charges due to infrastructure provision, tax-increment financing where localities are developed, allowing floor space index of 1 for land and selling rights to build beyond that and parking fee with money ploughed in to redevelop local areas in the growth hub.

Sameer Sharma is former chief secretary, government of Andhra Pradesh, and Debolina Kundu is director, NIUA. The views expressed are personal