Urbanisation key to driving growth engines Editorial 3rd Aug’19 FinancialExpress

Headline : Urbanisation key to driving growth engines Editorial 3rd Aug’19 FinancialExpress

Details :

Development and urbanisation:

• Development and urbanisation are two sides of the same coin.
• No society in recent history remained agrarian while adequately providing for its population.
• Urbanisation aggregates human activity—aggregation leads to specialisation, specialisation to increased productivity. This enables greater availability of goods, delivery of services, increased wages, and job opportunities.
• Urban areas are engines of growth in any modern economy.

Example of China:

• China is a shining example of how urbanisation drives economic growth.
• China rapidly urbanised from 26.4% in 1990 to 59.2% today, with the impact of dramatically improved quality of life and life expectancy.
• This also has an effect on China’s specialised workforce and productivity improvements—making China a Top 2 economy with nominal GDP of $14.1 trillion.
• In contrast, India is at $2.7 trillion, moving towards the target of $5 trillion by 2025.

 

 

India lagging the world in urbanisation:

• The world, on average, is at 55.3% urbanisation, whereas India lags at 34% (see graphic).
• India has been slow to urbanise because of the fixation on being a village-based society.

Leads to inequity:

• Most planners still look to Gandhiji’s sentiments from 1947 on this topic—‘The future of India lies in its villages’.
• Over the last 5 decades, complexity has increased, people’s economic needs and aspirations have grown, and it is impossible to supply adequate resources to India’s six lakh villages.
• Keeping India’s population in villages while being unable to meet their economic needs has resulted in high inequity.

 

Rural areas with agriculture dependency can only see little progress:

• Rural employment is mostly in agriculture. 42.7% of India’s workforce in 2016-17 was engaged in the agriculture sector, seeing only a 3.4% growth rate and contributing only 17.3% to the GDP.
• Meanwhile, 57.3% of the workforce was engaged in industry and services, growing at 5.5% and 7.6%, respectively.
• The income differential is very high, with the average wages of dependents on agriculture to industry to services being in the ratio 1:3:4 .
• Left unaddressed, this large group of agricultural dependents will always be limited to a sub-aspirational existence—with increasing distress and perpetual dependence on subsidies from the government.

Leading to urban migration:

• Lack of opportunities is also accelerating large-scale internal migration towards India’s few urban growth engines—such as Mumbai, Bengaluru, Delhi, Hyderabad, and others.
• 2011 Census indicates 43,324 uninhabited villages, presumably abandoned due to migration.

But our current urban areas can mostly only accommodate contract labour:

• Employment is unable to keep up with the inflow.
• Due to high costs, it is uncompetitive to set up industries in cities.
• Without industries to absorb the incoming rural population, they are mostly making low wages as contract labour.
• They can’t keep up with living costs—resulting in a growing urban population with unfavourable living conditions.

 

Indian urbanisation skewed towards just a few cities and towns:

• The 2011 census indicates there are 7,933 towns/cities housing 31.16% of the population, with an average population of 47,536.
• Of these, 465 towns have a population over one lakh and 53 cities, over ten lakh.
• This means the remaining 7,468 towns must have significantly lesser populations than the 47,536 average.
• The upcoming 2021 census will inform us of the current situation.

Deficit infra in these urban areas:

• Large cities are reeling under the strain of overpopulation, with problems like inadequate infrastructure and rocketing living costs.
• Because of the policymakers’ focus on villages, cities aren’t allocated enough to develop infrastructure to handle their rapidly expanding populations.

 

Need a systemic plan for urban migration:

• A compelling solution to this unstable situation is the systematic shift of people from rural to urban areas.
• Census data must be used to suitably identify 4,000-5,000 smaller towns all over India and develop them to absorb the rural-to-urban shift sustainably.
• GoI’s Smart Cities initiative has identified 100 cities so far, focusing on roads, solar, water, and control centres.

While expanding to 5,000 towns, certain critical aspects must be incorporated:

1. Infrastructure and connectivity:

• From the planning stage, it is essential to prioritise providing infrastructure like roads and airport access, internet connectivity, and other amenities.
• Not only is state-of-the-art infrastructure crucial for quality of life, it also provides the logistical backbone for a productive industrial environment.
• Moreover, commissioning large-scale infrastructure development will also boost the construction sector—another means of mass employment.
• We need strategic investments from both the central and state governments in these towns for parallelised infrastructure development.

1. Labour-intensive industry (LII) clusters:

• Creating many LIIs in and around the 5,000 towns is the best way to provide gainful employment to the transitioning population.
• By focusing on the right type of industries—garments, fabrication, electronics assembly, automobiles, so on—this move will also boost India’s export capabilities.
• With focused skilling programs, LIIs will offer excellent income opportunities to the incoming population.
• Even a lower wage than cities will go a long way towards quality of life, especially since living costs are lower in towns.
• Women, who cannot afford to move long distance from home, can also now find employment near their villages and towns, commute and earn a living.
• Governments, apart from focusing investment here, must also provide incentives for the private sector to create LIIs.

1. New sustainable technologies:

• While urbanisation improves delivery of services, it poses several challenges like congestion, restricted mobility, high waste production, and pollution.
• India must invest in understanding state-of-the-art technologies and implement them.
• The newly developed towns will have the advantage of getting sustainable infrastructure integrated from the planning stage itself, including:
  • Renewables like solar panels and wind turbines
  • Planned tree cover to offset urban spread
  • Water treatment facilities based on phytoremediation and other plant-based technologies
  • Integrated recycling
  • EV infrastructure
  • Public transportation with last-mile connectivity
• Older cities will need careful planning to incorporate new technologies into unwieldy city plans.

1. Planning for capacity:

• Indian policymaking has a tiresome tradition of planning projects based on latest available data—usually outdated—like the previous census.
• By the time projects are completed 5-10 years later, they are operationally overloaded.
• Instead, it is necessary to plan projects for sewage treatment, airports, roads, water supply, and so on with at least a 20-30-year forecast with provisions for future expansion.
• Again, China paves the way—many major airports have received the go-ahead to build a third runway and increase seating capacity by forecasting the demand to 2030.

 

Conclusion:

• Rapid urbanisation is essential to sustain India’s impressive 10-year growth trajectory and meet PM Modi’s 2025 economic target of $5 trillion.
• The proposed network of small towns and industry clusters can become India’s engine of growth and provide jobs at scale, thus improving overall economic prosperity.
• Sustainable urbanisation can be the force multiplier to mobilise India’s potential.

 

Importance:

GS Paper III: Economy