Budget 2023 provides a shot in the arm for infrastructure and cities, given their importance for the economy. Progressively too, Union Budgets have attached more importance to local issues which is welcome in a federal structure.
This year’s Budget has raised capital expenditure in infrastructure by 33 per cent, to 3.3 per cent of GDP; this had remained constant since 2010 for many years. In terms of infrastructure requirements, as per an ADB (2017) study across all subregions in Asia, the Pacific leads, requiring investments at 9.1 per cent of GDP, followed by South Asia (8.8 per cent of GDP), Central Asia (7.8), Southeast Asia (5.7), and East Asia (5.2). So, even with the increase in infrastructure investment, there is a gap for India to fill.
However, the Budget is not the only forum for reflecting the policy priorities and expenditure of the government. On October 13, 2022, Prime Minister Narendra Modi launched Gati Shakti, aimed at developing integrated infrastructure for improving logistics, which is a welcome move. A recent study in Karnataka revealed that firms’ operations and maintenance costs due to poor logistics in smaller cities and towns are much higher than their capital expenditures. So any move to improve logistics and reduce O&M costs of firms has the effect of creating job opportunities more evenly across areas.
An Infrastructure Finance Secretariat has been set up to monitor lending to sectors such as railways, roads, highways and urban infrastructure, which facilitate the Make in India initiative. At the same time, there’s a need to phase out fossil fuels, which is a challenge.
There is a thrust on sustainable cities, as part of which States are encouraged to undertake more systematic urban planning, transit-oriented development, and make available affordable urban land. This touches important problems our cities face, including traffic congestion and dearth of affordable housing. But how to tackle these challenges? Even though urban development is a State subject, some roadmap should be provided to States for systematic urban planning, as some of our national frameworks for urban/regional planning and building bye-laws are archaic.
Property tax reform
The Finance Minister rightly emphasised on the role of property tax reforms, to improve the creditworthiness of urban local bodies. An Urban Infrastructure Development Fund (UIDF) is to be established, for which an annual outlay of ₹10,000 crore has been earmarked. If this outlay is divided across the 7,000-plus cities and towns of the country, it works out a mere ₹1 crore per city. So more resources are needed and private sector participation should be pursued.
The Budget’s emphasis on getting rid of manual scavenging is noteworthy. The Finance Minister alluded to the scientific management of dry and wet waste in our cities. However, at the implementation level, many problems remain with solid waste management, which only local governments can sort out.
The allocation for the Pradhan Mantri Awas Yojana for urban housing has been increased to ₹79,000 crore, up 66 per cent. But financial constraint is not the only challenge in urban housing. While the budgetary allocation helps in timely construction of houses and reduces the demand-supply gap, the house occupant’s needs and preferences, cost overruns and quality of construction should be considered.
A national data governance policy for academic research and innovation was rightly emphasised. Anonymised data are needed, which should be periodically made available, and be consistent across sources. At the minimum, we should have recent Census data. Given our economy and society have made great strides during the past decade, any information from 2011 is obsolete for evidence-based policymaking.
This Budget has taken the right steps, the journey must continue in the same direction.
The writer is professor, Institute for Social and Economic Change