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Budget 2023-24: Impact on Urban India & Local Governance – IMPRI Impact and Policy Research Institute

Budget 2023-24: Impact on Urban India & Local Governance - IMPRI Impact and Policy Research Institute

Tikender Singh Panwar

This year’s budget is a bag of misplaced government spending priorities and misses some crucial challenges facing urban development.

The last full Union budget of the National Democratic Alliance (NDA) government continues to be plagued with the idea that “the private capital will ameliorate some of the basic problems of India and that large capital-intensive technologies will usher in development, including inclusive development.”

How fallacious is this argument? We have seen this in the past three decades. The structural difference brought in by Manmohan Singh’s budget in 1991 was to “shift India’s economy away from the hands of the government to the hands of private enterprise, and embraced free trade.

This was a global phenomenon. However, with passing time, many nation-states switched back to more State intervention, particularly the United States of America and the United Kingdom. One of the reasons for shifting back to State intervention was the gross inequality in wealth generation, particularly in the urban world. This was pointed out in the Habitat III conference in Quito where John Closs, the executive director, noted that the past decades of laissez-faire must be abandoned and basics of planning must be followed.

The current Union budget was expected to address this pertinent issue of massive social spending ensuring a demand in the economy and thus bulwarking for growth from below. However,  the finance minister in her speech said: “In the 75th year of our Independence, the world has recognised the Indian economy as a ‘bright star’.” The euphoria of being a bright star is the veneer to cover the serious challenges, which both the Indian economy and the people at large face.

The broad direction of the budget is for more capital expenditure at the cost of social expenditure. Massive cuts have been made in rural employment guarantees and other social sector spending schemes. However, the Union government has been claiming that an increase in capital expenditure, particularly in the cities, will boost growth.

“Cities as engines of growth”, another fallacy that guides the current dispensation, is one of the forms of steering development in the cities. Let us explore what the Union budget offers for urban India and particularly for its people.

Reduced Budgetary Spending

The total Central government expenditure in relation to GDP has fallen. It was 15 % of GDP in the period of 2009-10 to 2013-14, fell to 12.8 % under the NDA-1 government from 2014-15 to 2018-19, and in the current year it is 14.9%. So, the much-acclaimed figures for government expenditure, in fact, remain almost the same. Let us see what has been the story of urban development.

In urban development, the total expenditure of the Central government has fallen from 0.5 % of GDP in 2021-22 to 0.3% in the budgetary estimates for 2023-24. The only increase is in capital expenditure, from 2.5% of GDP in 2021-22 to 3.3 % in the budgetary estimates.

The rise in capital expenditure, when taking into consideration a modest inflation of 6 %, would be not of much value. Though the push for an increase in capital expenditure, particularly in the cities, means a push for more capital-intensive technologies and not social sector spending. Let us see how this has happened sector-wise.

The total budget outlay for the Ministry of Housing and Urban Affairs (MoHUA) has seen a fall. The 2022-23 proposal was Rs 76,549.46 crore (capital Rs 27,341.01 crore and revenue Rs 49,208.45 crore), and for 2023-24, the proposal is Rs 76,431 crore. Add inflation to this, the fall is more than 6%.

Committed to benefits for large corporates, the current budget spends nearly 30.32% of the total urban budget on Metro rail construction. This is limited to a few cities, and most of the cities are running huge losses. The cities have been demanding a large fleet of buses and multi-modal transport. However, the emphasis is on capital-intensive technologies, and the Metro is one of them. The total outlay under this head is Rs 23,175 crore with a capital expenditure of Rs 23,056 crore.

PMAY(Urban) – Drastic Fall in Outlay

A cursory look at some of the master plans (development plans) of some cities exhibits that the emphasis is on land pooling and the market playing a major role in housing. Added to this is a concept called ‘Transit-Oriented Development’(TOD). The finance minister in her speech said, “ …this means efficient use of land resources, adequate resources for urban infrastructure, transit-oriented development, enhanced availability and affordability of urban land, and opportunities for all.”

Once again providing social housing is not even mentioned in the speech. TOD, throughout the world, is a model of the private partnership meant for just a small section of the urban population. This will not help the mass of people. Precisely because of this reason, there is a huge reduction in the allocation for PMAY(Urban) from Rs 59,963 crore in 2021-22 to Rs 28,708 crore in 2022-23 to further fall to Rs 25,103 crore in the 2023-24 budget.

The Smart Cities Mission, the flagship programme of the Narendra Modi government, does not even find a mention in the finance minister’s speech. The allocation on the Smart Cities Mission has seen a fall of Rs 800 crore from last year’s budget. The total outlay under the urban rejuvenation mission comprising both AMRUT and Smart Cities Mission is Rs 16,000 crore (last year Rs 15,300 crore, taking 6% inflation into consideration the outlay is less than the previous year), which once again fails to address the growing demand of urban infrastructure in the country. The only notable feature is the promise of providing mechanical sewer cleaning machines in all towns.

Misplaced Priorities and Misses

Under the head, ‘Sustainable cities of tomorrow’, the Union budget explains sustainability. Accordingly, sustainability comes from TOD, municipal bonds, enhanced availability of urban land, efficient use of land resources, etc. This is not the way to achieve 17 Sustainable Development Goals, most of them are linked to cities.

It is ridiculous to even imagine municipal bonds as a mode for generating revenue resources in cities when most cities are not even able to bear their expenses under a non-plan head. Who will buy municipal bonds in such cities?

Urban Employment Guarantee

The most important intervention the Central government could have made was to ensure a minimum employment guarantee scheme in cities across India. The pandemic has shown how vital this demand is.

Likewise, the budget failed to address the issues pertaining to migrant workers in cities. More than 28 crore people have already gotten themselves registered under the related portal. The least that the government could have announced is construction of houses, particularly rental and labour hostels, for a city’s working people.

The budget is also completely silent on pollution and the impact of climate change in cities. We have one of the highest polluting cities in the world. There should have been an integrated approach to dealing with it. In fact, urban mobility, instead of focusing on Metros, should have been the priority of this government. The disaster risk reduction and mitigation and adaptation strategies could have been important areas of capacity building in cities and grants linked to such programmes would be highly beneficial.

However, the current budget, with its too myopic vision of just increasing capital investments (whether that will happen or not is another question), has completely brushed aside the social aspect of human lives!

This article was first published in News Click as Budget 2023-24: What it Means for Indian Cities on 6 February 2023.

Read more by the author: Cities and ‘Triple Engine’ Sarkaar

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