India: smart cities need smart governance

The proposed Dholera smart city in Gujarat. Image: Dholera smart city.

Narendra Modi, India’s new prime minister, is a leader with an urban vision. Before becoming prime minister, he was chief minister of Gujarat, where he transformed the state capital Ahmedabad with an award-winning sustainable bus transit system and a “world-class” riverfront recreation space.

Today, Modi’s most ambitious projects in the region are two planned new “smart cities”: the Gujarat International Finance Tec-City, on the outskirts of Ahmedabad, and Dholera, an industrial hub on the Delhi-Mumbai corridor. Still in inception, these cities are at the heart of the new administration’s ambitious plan to transform the crumbling and chaotic image of Indian urbanisation by building a hundred new smart cities

China is an inspiration for Modi, both in its larger push for modernisation through urbanisation, and its state-of-the-art new developments like Tianjin’s famous “Eco-city”. For urbanising countries like India and China, smart cities are an opportunity to turn urban growth into sustainable development.

Modi’s new policy has generated excitement amongst business leaders and urban elites tired of living in “third-world” environments. But whether India’s smart city policy will translate into the desired outcomes – more sustainable, more productive and better-governed cities – is debatable. Both smart and traditional cities need strong and effective local institutions to flourish. In India, that simply isn’t the reality.

1. India’s Megacities lack autonomous governments with the power to shape their own affairs.

Instead they’re controlled by provincial administrations, and managed by a patchwork of state, city and municipal bodies, public and private corporations and village panchayats (a sort of parish council).

But if smart cities are to have any impact on planning, coordination and governance, there needs to be a centralised metropolitan governing structure, accountable to city residents. If city governments do not have the incentives and resources, the trappings of a smart city – cyber highways, digital sensors, smart cards and computerized management systems – will remain just trappings: like the city development plans and environmental policies Indian cities regularly prepare but rarely implement.

2. Local authorities bear the financial burdens of service delivery without the powers of revenue generation.

City and local governments, responsible for basic public services, have the most direct impact on well-being, particularly that of the poor. In India, however, there is a glaring mismatch between their functions and capabilities.

Urban local bodies account for a third of public expenditure but just three percent of revenue. Property taxes, the main revenue base for municipal governments, constitute just 0.44 percent of India’s tax revenues, strikingly lower than other emerging economies.

Moreover, most so-called “smart city” or “new city” projects underway in India are happening outside official city boundaries. Most aren’t new cities at all, but self-contained commercial, residential or industrial enclaves adjacent to major cities. The revenues from such policies typically go to provincial levels of government, which are in charge of urban development policy; municipal and local authorities are left holding the costs. This pattern undermines the potential of city governments to grow into effective, well-resourced and democratically accountable institutions that can effectively improve urban conditions.

China is politically centralised, but administratively and fiscally it is far more decentralised than India. Its local governments account for half of public expenditure and 25 percent of revenue. They have the tools and resources to plan and manage growth; they can annex surrounding rural areas, and use land revenues to fund urban development. This strategy has allowed China to urbanise rapidly, with infrastructure and services keeping pace with or preceding urban population growth. India will struggle to follow suit.

3. Urbanisation in India has not been strengthening local governments

Urbanisation, historically, has been a time where public institutions are built and strengthened, from utilities to regulatory institutions, social welfare services to libraries and hospitals. So the current fragility of India’s civic institutions will have a serious impact on its ability to deliver improvements in wellbeing to its rapidly growing urban population.

Rural urbanisation accounted for nearly 30 percent of urban growth in India over the past decade. It’s created hundreds of newly-urban settlements which don’t have the municipal institutions required to collect taxes, plan development or deliver public services. As a result, slums and informal settlements, once a big city problem, are becoming more widespread.

By 2040, India’s urban population will be over 600 million. Amartya Sen describes India as a place where “islands of California” exist amidst a “sea of sub-Saharan Africa”. To mitigate, rather than entrench, inequities India needs an urban agenda that is more wide-ranging, inclusive, sustainable and locally-driven than one centered on new smart cities. 

The plan to build a hundred new smart cities is both grandiosely ambitious and deeply inadequate. Even if realised, it is unlikely that the smart cities will do much to alleviate India’s urban ills or secure broad-based economic opportunities and improvements in living standards for the majority.

Employment generation, environmental and social criteria, governance and public participation should not just be window-dressing, but must be taken seriously. Unless they are, the hundred smart cities will be nothing more than a hundred real-estate projects.


Shahana Chattaraj is a postdoctoral fellow in comparative public policy at the Blavatnik School of Government, University of Oxford, which exists to inspire and support better public policy and government around the world.

The Challenges of Government Conference – “Flourishing Cities” will take place in Oxford on 11-12 December.


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