Urban Development Project

Key elements of India’s urban sector strategy: With nearly 300 million urban residents,

India’s cities contribute over 60% o f GDP and account for more than 90% o f Government

revenues. Their efficiency has a significant and direct bearing on the country’s overall economy.

Yet, few cities, if any, are able to provide the kinds o f urban services required on a regular and

sustainable basis. In addition, even fewer adequately collect tariffs for the services provided or

have credible financing systems that would allow them to access India’s emerging financial

markets. India’s cities could contribute more effectively to the country’s economic growth, and

poverty reduction, if they did not suffer from severe infrastructure bottlenecks, service

deficiencies, weak finances, poor local governance and distortions in land and factor markets.

The National Planning Commission estimates that achieving meaningful urban reform, could add

1.25-1.4 percentage points to India’s economic growth rate over the Tenth Plan Period (2002-

2007). Thus for India, accommodating the needs o f i t s growing urban populations i s now and

will continue to be a strategic policy issue for many years to come.

2. The Tenth Plan estimates urban investment needs to be about US$7 billion for the Plan

period (2002-2007) o f which only about a third is available through budgetary resources. Over

the past decade, growing concern about the ability o f cities to provide the level o f urban services

commensurate with their contribution to economic activity has led to significant changes in

India’s urban development policies, through complementary strategies o f decentralization and

financial sector reform. The 74’ Constitutional Amendment aimed to decentralize what had

been highly centralized and regulated policies which had directed investments away from cities,

particularly away from long term urban infrastructure investments.