Sunday, January 2, 2011

Urban India 2020: Models for Growth

With a land area of 3.2874 million square kilometers and a population of 1.2 billion, India has 2.4 percent of world land area but supports 18 percent of world population. By 2020, India is estimated to have a population of 1.33 billion, with an astonishing demographic dividend; average age of an Indian would just be 29, compared to 37 in China and 48 for Japan. With economy poised to grow at 9 percent per annum, gainful employment of the huge workforce is both the challenge and the opportunity for India. Seventy percent of the Indian population lives in India’s 638,000 villages while 30 percent of the population lives in 5100 urban habitats. With economic growth, urbanization is projected to expand further, requiring to support 40 percent of the population by 2020. Most industrial and economic investments would be made in and around the urban habitats as part of the unabated economic growth.

Urban challenge

If the central and state governments do not address the issue of strategic urban planning, the opportunity of economic growth could turn into a serious nightmare. Indian cities and towns are already bursting at the seams. The pressure on civic facilities has grown enormously within each city and town, with the governments and companies preferring to focus themselves on city centers and extensions which have established social infrastructure. This coupled with continuous migration of people from rural and semi-urban habitats to such established cities has enhanced the pressures on the limited road space and other social infrastructure beyond bearable levels. As each suburb becomes a beehive of industrial activity, cross-movement of people and materials tends to create unceasing traffic logjams. An Indian worker today spends additionally anywhere between 25 and 50 percent of his work time moving between home and office, adding yet another reason for low productivity and skewed work-life balance.

In the past license raj of the 1950s to 1980s, the governments directed industrial activity away from cities. Virtual barren lands were converted into thriving industrial townships, creating new cities. While a modern Indian who is used to seeing swanky factories coming up in city suburbs may baulk at the trend of the yesteryears there is no doubt that industrial dispersal brought economic benefits and de-pressured the urban systems. This phenomenon is by no means Indian-dogmatic or government-centric; India has its own Jamshedpur and Jamnagar in the private sector while Hyundai and Toyota helped build cities in Korea and Japan respectively around their sprawling industrial complexes. The Indian model was however weak in that the principal sponsors (public or private companies) could only do some part of social construction; their principal purpose had to remain that of building, equipping and operating factories. The industrial dispersal trend lost the steam with economic liberalization in the 1990s and beyond as the governments began to woo private and foreign investors with industrial estates developed nearer the cities. This has, in turn, created more tier 2 cities while converting cities into metros. However, this level of urbanization has resulted in severe stress on the dilapidated urban systems.

Urban decongestion and expansion of cities on one hand and creation of new satellite towns on the other have been the two principal strategies adopted by different state governments in India. Some governments followed a radical policy of broadening city roads of their metros by demolishing houses and shops on either side (with compensation to the owners) and also setting up new suburban hubs. Some metros focused on creation of new suburban hubs and office complexes. A few others followed a city extension strategy in three directions, with either IT or industry being the primer for such extension programs. Satellite cities were enabled as alternative locations but they themselves became as pressured as the primary cities. Various connectivity models were also followed; a bus-train system in one case and metro rail in a couple of other cases. Cities known for their natural beauty and salubrious weather became victims of aggressive development of offices and businesses in all directions. Even cities which saw flight of capital have seen businesses streaming back to operate in green as well as reclaimed land belts.

Whatever be the strategies adopted by various governments, Indian cities are continuing to grow faster than can be handled. Space has been, and would be the greatest limitation for economic growth, as Indian urban planning continues to develop in the legacy spatial planning model. It is not that every city has to be planned only like an American city with clearly demarcated areas, highways, flyovers and green spaces. Japan has a number of cities that support a smooth life in cramped spaces. This is achieved with a combination of social discipline (pedestrian walking plus non-use of automobiles) and a huge system of metro rail (underground, on-ground and elevated) systems. The task for India is in terms of infrastructural planning as well as attitudinal shaping to enable the society achieve substantially more with the needed incremental investments.

Determining factors

The choice for India as it plans the new age urbanization could be an amalgam of the American model as well as the Japanese model adapted to Indian user model. As India keeps its tryst with the destiny of becoming a superpower, the following factors would characterize the evolution. Firstly, there would be a burgeoning of factories, offices and businesses across the country, several of them in and around the 5000 plus urban habitats. Secondly, growth will be focused (i) in and around cities with redevelopment of legacy land and buildings and (ii) on adjacent and near to national highways. Thirdly, consumption centers (shopping malls and movie multiplexes), development centers (schools, colleges and universities), and living centers (houses and hospitals) would be as important as business or factory districts. Fourthly, connectivity (rail, road and air) would determine the productivity of operations and the quality of work-life balance. Fifthly, the opportunistic pace of new business development could be far higher than the planned pace of urbanization, unless new development perspectives are co-created by various stakeholders.

The combination of factors as above could be a heady cocktail for urban vertigo, driving the society from aspiration to exasperation unless strategic plans are developed covering each of the above five factors through centralized and coordinated planning. While avoiding a throw-back to the old licensing regime of directed industrial or enterprise location, the governments should come up with clear demarcation of land for different uses as stipulated above. This task of spatial guidance is a specialized function which needs to be undertaken through analytics by a standing institute rather than by government departments. At the same time companies proposing mega projects must examine how they could facilitate orderly planning of social infrastructure by discussing with the central planning institute, local civic authorities, and private real estate developers their requirements of civic infrastructure. Conceptually, every industrial planning initiative must have an accompanying social planning initiative, each of which must be formalized as specific projects in the hands of experts.

Conceptually, the urban development models would differ based on the key trigger for the urban expansion. The following two models are suggested.

Socio-industrial model

The classic model in India which gave birth to industrial cities such as Bhilai, Bokaro, and Rourkela (all based on government owned steel plants) as well as Jamshedpur and Jamnagar (based on private sector steel, vehicle and petrochemical plants) was based on industries acting as engines of development. Despite generation of huge wealth these cities have failed to reach the status of even tier 2 cities in social attractiveness index. The same may be said of the several suburban industrial hubs that came up, or are coming up, near established top cities in various states. Despite major industrial investments, some new industrial cities have not measured up to the desired levels of sustained factor inflows. At the same time, even though each State has at least ten to twenty urban habitats which could have supported a larger industrial growth given their factor endowments such towns remained tier 2 habitats.. Clearly, the trigger for synergistic socio-industrial growth is hard to identify.

An analysis of the industrial cities which rank high on industrial concentration but low on social acceptance and the civilian cities that continue to remain as the hot contenders for industrial growth despite stressed out urban infrastructure indicates that unless social, educational and quality of life infrastructure develops on par with industrialization, the overall urban development will remain skewed. A socio-industrial model by which governments pursue simultaneously development of all the four infrastructural bases would, on the other hand, have multiple benefits. Establishment of urban development boards with public-private partnership, co-opting of qualified investors in real estate and education in talks with industrial developers, grant of major social infrastructure projects simultaneously with sanction of major industrial projects would go a long way in rolling out a sustainable socio-industrial model.

The socio-industrial model by definition would need to focus on creating mini socio-industrial cities, perched between already developed hubs. Several corridors can be conceptualized in this manner, each extending to a length of 100 to 150 kilometers or so, and connecting about 200 to 250 non-city, larger urban habitats. By avoiding arable land belts as well as bio-diversity land belts, and creating special economic zones in dry and non-arable land belts, a golden mean of complementing agriculture with industrialization can be achieved. The socio-industrial model would require a large measure of inter-district and inter-state and political consensus to succeed. If enabled, the socio-industrial model could be a great optimizer for the federal economy on one hand a robust bridge between rural and urban habitats on the other.

Connectivity-productivity model

Experience in India and elsewhere suggests that connectivity is an essential element of industrial productivity. The Indian rail and road systems are saturated. The railway system has remained virtually static for decades while the national highway and golden quadrilateral road systems merely catch up with the current congestion. If the Indian railways create a new 10,000 kilometer cross-country rail network, connecting hitherto unconnected tier 2 and tier 3 cities there would be all-round triggers for industrial dispersal. This when integrated with dedicated freight corridors and bullet trains would usher in a sea change as to how industries and societies feel connected with each other. The connectivity model would be a great new way of stand-alone employment besides channeling industrial investment into the interiors to spur further employment.

Experience in China suggests that rural people migrating to urban factories provides distinct initial cost advantage which, however, ebbs over time. Proactive movement of factories into hinterland on the other hand could help sustain more durable crucibles of productivity. In India, certain industries such as food processing, personal product which utilize factor resources and also finds contiguous markets could benefit from such reverse migration of factories to people, as opposed to traditional migration of people to factories. This approach along with the connectivity approach could diversify the geographic base of industries substantially.

An essential facet of the connectivity-productivity model is mutual leveraging of industrial and infrastructural options. As a principle, every city or urban habitat having at least a select number of industrial parks and/or special economic zones (SEZs) in contiguous space must have a top class domestic airport and the ones with a large number of such industrial campuses should have an international airport even. From a reverse logic, cities and towns with airports and ports must be targeted to develop industrial clusters. For example, Krishnapatnam which would have a major sea port and a mega power plant operational soon must be developed to have more industrial parks, and an airport too. The essence of connectivity-productivity model is building of new spokes of development around upcoming infrastructural and connectivity projects.

The challenge in the connectivity-productivity model is one of developing the social infrastructure such as residences, schools, colleges, hospitals, entertainment complexes and so on. By preferential allocation of land for pioneering industrial and infrastructural developers, incentives can probably built into the development system. The already established capabilities in the more competed socio-industrial system can be leveraged for the benefit of the less endowed but less competed connectivity-productivity system. There can, however, be no understating of the requirement to enhance skill levels in this model. Companies and agencies would need to deploy special efforts for this purpose, both through in-house and collaborative efforts. If companies already established in the socio-industrial system move into the connectivity-productivity system, methods of training by deputation from one system to the other can be beneficial.

Role models and thought leaders

It is gratifying that India has many public sector and private sector role models that excelled in creating these systems in their own way. The top 21 public sector undertakings belonging to the Maharatna and Navaratna categories and the several top private sector conglomerates as well as some individual mega companies have excelled in creating assets, skills and wealth in barren tracts inIndia. Even as these and other groups venture into other countries to secure factor and cost advantages, focus must also be on the potential that still remains to be exploited within India itself to achieve more intense and more diversified social and industrial transformation.

The Government of India, especially the Planning Commission, can play a very important role in systematizing and accelerating urban development, comprising both renewal and expansion components. The Commission may, however, need to tweak the planning processes a bit. Firstly, given the interplay of industry, society and infrastructure the planning horizon would need to be extended to ten years, from the current five years. Secondly, the current emphasis on sector-wise and ministry-wise plans will need to be supplemented by strategic spatial planning. Thirdly, an institute of analytics to develop urban spatial planning models and their components needs to be established under central aegis. Fourthly, the Commission would need to establish supportive state planning processes as well as apolitical engagement processes amongst all stakeholders. Finally, central and state governments would need to engage bilaterally and multilaterally to optimize land use across the country for social and industrial benefit.

The private sector and public sector corporations have no less a role to play. Industry organizations such as CII, FICCI and ASSOCHAM as well as public sector bodies such as SCOPE would need to establish public-private boards which can develop perspectives of social industrialization. The industry bodies are well positioned to undertake or commission studies which develop socio-economic logic for various urban development options, drawing upon international comparisons where appropriate. These bodies can be the vital link between the entity plans, and public perspectives for understanding the industry’s passion for profitable growth, the government’s mandate for economic welfare and the society’s yearning for integrated development.

Posted by Dr CB Rao on January 2, 2011

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