The Cabinet approval for central funding of $16 billion for 100 smart cities and 500 rejuvenated cities may change the way we live and work, the way we carry out business, and the way we are perceived by the rest of the world. More importantly, it is expected to give an explosive push to the growth of the economy, on a scale that can dwarf even the growth provided by the Golden Quadrilateral project.
To get an idea of the magnitude of the impact, it is important to understand that the entire initiative could probably cost over $5 trillion in today’s value, and may spread over at least 20 years, if not more.
So, what would $16 billion provide against the overall requirement of $5 trillion? This initial funding of $16 billion is like seed money to bootstrap the process of urban rejuvenation and build 100 smart cities. As each city gets built up and as cities get rejuvenated, it can have an amplifying effect on the economy as it starts to become more and more efficient, allowing faster growth, which, in turn, could lead to larger investments into our cities. Hence, the initial $16 billion, and whatever else the central government earmarks for this initiative in subsequent years, is expected to play the role of catalysing the private sector to step in and invest in a series of initiatives in our cities, which would fall under the category of public-private partnership.
However, why is this interesting from a place-to-dwell perspective? These cities aim to transform the way we live, work and also think. Since these cities will be smart, they may consume less energy, be neat and tidy, have a cleaner environment, be more safe and secure, and also be resilient to disasters—both natural and man-made. What this means is that these cities may draw energy from in situ sources such as solar. Water may be recirculated with near-zero wastage. Sewage may be treated locally. Transportation could be far better managed through technology and even have near-zero pollution. With clean air, clean water and a minimally-polluted environment, health and quality of life can improve significantly, making Indian cities one of the most preferred cities in the world to live in.
This is only a snapshot of what smart cities can do in the short run. In the long run, they probably could change the way we think. They could push us to be more innovative, making us think in a manner that we have not been able to do so previously due to the cacophony of systems and processes that run our cities. The standardisation of city systems could lead to exponential increase in adoption of innovations within the city systems, which, in turn, could lead to creation of new kinds of industries that hitherto do not exist. And just as in many leading economies, innovation is expected to contribute a lion’s share to the GDP.
Beyond the impact that the Cabinet decision will have on India and the Indian economy, it is important to note that it may also have a very significant consequence on the global economy. The expected total of $5 trillion spend is equal to about 7% of the current global economy. As India starts spending on her cities, it may start consuming goods and services from the global market—this proving to be the desperately-needed global growth engine. Therefore, the Cabinet decision is expected to have a far-reaching impact than just contributing to India’s growth.
This initiative, when juxtaposed with the ‘Housing for All by 2022’ and the ‘Make in India’ programmes, can also have a highly amplified impact on India, the Indian industry and the Indians per se. The Housing for All initiative will hopefully provide the framework and funds that can lead to many families in the country having their own homes. And many of these homes may not be ordinary, but could even be smart homes that are able to talk and interact with the larger city, unleashing advanced technology industries in India and making it easier to live here.
However, the execution of smart cities and city rejuvenation plans also needs to be appropriate to get a greater return on investments than what previous attempts had brought in. As of now, the government is planning to have a ‘city competition’, wherein cities can hire consultants to present what their plans are and why they should be selected in the first lot of 16 cities to be short-listed for being funded by the government. If that turns out to be the case, then cities with more capacity, which, needless to say, are mainly in the southern and western parts of the country, would end up having the bulk of the funding for becoming smart cities. However, this may deprive the ordinary citizens of an equitable opportunity to have their city upgraded. Also, this would not allow equitable distribution of funds to cities across the country.
If, on the other hand, the government uses its discretion and equitably distributes the funding across the country—based on considerations of population and other social-economic criteria—then perhaps the mechanism of ‘city competition’ would seem like a misnomer and should probably be called a ‘city readiness and planning’ exercise.
A ‘city competition’ is used in developed countries, where cities are inherently highly developed and liveable, and such a ‘competition’ is brought in to discover potential leading practices that could make these cities even better.
A ‘city competition’ is used in developed countries, where cities are inherently highly developed and liveable, and such a ‘competition’ is brought in to discover potential leading practices that could make these cities even better.
However, in India, cities do not even have basic level of facilities that are expected from a city of a globally competitive economy.
We are at the threshold of an exciting new India. It is important that the execution is flawless. The mechanism of using ‘city competition’ as a basis for providing funding to cities needs to be executed in a manner that is non-discriminatory to those cities which are already laggards and have much lesser capability to scale up to be able to be considered under the competition mechanism. It is important for India and the global economy that this initiative is a resounding success.
The author is partner, Infrastructure & Government Services, KPMG in India. Views are personal
First Published on May 13, 2015 12:27 am