Growing cities

Aug 20 2014, 04:15 IST
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SummaryUrbanisation will propel the next leg of growth

India’s urban map is growing inexorably, and its dogged and demanding expansion taking town planners and cartographers by surprise. The next leap in India’s urbanisation, according to a Kotak report, will be defined by (i) services-led growth —as against manufacturing, which grew some of the world’s large old cities, and (ii) organic expansion—the spread of existing city hubs into multiple suburbs that will then become hubs of commerce themselves; the trend says more citification, but not necessarily more cities.

India’s steady urbanisation has the potential to bring in investments of R120-150 trillion over the course of the next 11 years till FY25, says the Kotak Institutional Equities report titled Multiplicities. City expansions will call for a dramatic increase in (i) housing stock, (ii) transport infrastructure, and (iii) utilities, like power and water. Investment in these segments would be at $2-2.5 trillion over the next 11 years to FY25, noting that India’s GDP in FY14 was $1.9 trillion. India will therefore need to invest between 8 and 10% of its GDP on developing its urban infrastructure. India overall invested 34.7% of its GDP in FY13.

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India’s urbanisation call for 2.5 billion tonnes of cement, 650mt of steel and 4.6 mt of paints over the next 11 years. To put this in perspective, installed capacities in these sectors as at the end of FY14 are: 369 mt of cement, 94.3 mt of steel and 2 mt of paints. Urbanisation will also lap up 1.5m km of new roads and 35b sq. ft in new housing. The magnitude of investments required for this scale-up in urban infrastructure—in terms of capital goods as well as services—is large enough to kickstart India’s moribund capital cycle and trigger the next leg of economic growth, says the report.

As India re-imagines its urban landscape, it needs to focus on making its top-100 cities livable rather than creating 100 new cities. Indian cities rank very poorly when compared to their international counterparts. New Delhi and Mumbai rank 46 and 52, respectively, on the Spatially Adjusted Liveability Index and 52 and 53 on the Economist Intelligence Unit Liveability Index, in 2013.

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Actually, the idea of ‘creating’ new cities belongs to the era of manufacturing-led growth, something that has not been the case for India. Even if this evolves with the development of infrastructure like the Delhi-Mumbai Industrial Corridor (DMIC), which is

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