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Cities and Union Budget 2022-23 – IMPRI Impact and Policy Research Institute

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Cities and Union Budget 2022-23 - IMPRI Impact and Policy Research Institute

IMPRI Team

The Union Budget of 2022-23 announced by the Finance minister on 1st February 2022 includes major policy changes for urban planning and education. To examine and analyse these changes, the Center for Habitat, Urban and Regional Studies (CHURS), IMPRI Impact and Policy Research Institute, New Delhi, hosted a panel discussion under the #WebPolicyTalk series, The State of Cities – #CityConversations titled Cities and Union Budget 2022-23. 

Dr. Soumyadip Chattopadhyay, Associate Professor, Visva-Bharati, Santiniketan; Visiting Senior Fellow, IMPRI, New Delhi was the moderator and commenced the session by highlighting two pressing challenges faced by Indian cities. The first is making the cities liveable by addressing pervasive service deficiencies and the second is making cities engines of economic growth. The pandemic has brutally exposed the realities of service inequalities. Several studies have also noted the livelihood crisis faced by urban citizens. Therefore, this budget calls for a paradigm change in the ways the cities are managed and planned. Finally, it’s the budgetary details of resource allocation in urban programs and broad urban policy guidelines that determine the speed as well as the trajectory of these paradigm changes. 

Urbanization a Priority 

Dr. Rumi Aijaz, Senior Fellow and Head, Urban Policy Research Initiative, Observer Research Foundation (ORF), New Delhi was the chair of the discussion and observed how on the one hand the government argued that this is the best budget in the world. However, at the same time, oppositions parties hold very different opinions. 

Dr. Rumi showed an agreement to the claims of some parties that this year’s budget focuses too much on the urban sector. A significant population of India lives in rural areas and villages and although India is urbanizing, the transition is gradual and it will take several years when almost half of India’s population will live in urban areas. Dr. Rumi observes that the budget gives some urban sectors more importance and supplementary measures i.e. capacity building, finance, resource mobilization, etc. have been recommended to achieve what has been proposed. He recommends four things that act well as starting points for the analysis.

  1. The overall picture i.e. when compared to the previous year’s budget, there has been enhancement in the allocation for urban cities. 
  2. Some sectors have received higher allocations and this trend has been followed in the past as well. Absolute figures show the highest allocation to mobility (mass transport and metro rail projects) and housing.
  3. When comparing National Livelihood Mission and Swachh Bharat Abhiyan with other urban development programs, the increase of impact in the former is significantly more than the latter. 
  4. The budget chose to include allocations for all missions run by the ministry of housing and urban affairs and none of the missions has been neglected.

Dr. Rumi raised some pertinent questions for the other panelists in attendance. He wondered if this year’s budget is sufficient in the context of emerging challenges and is inclusive of all communities. How are states/urban local governments/municipalities dependent on the center and what is the stance of the union territories on the budget?

Mainstreaming Smaller Cities & Towns 

Prof Mahalaya Chatterjee, Professor, Centre for Urban Economic Studies, Department of Economics, University of Calcutta pointed out how the budget is decided annually and hence is short-termed. Therefore, we don’t have a lot of scope for evaluations and impact analysis. Prof Mahalaya observed that the word ‘urban’ was there 22 times in the 32-page document of this year’s budget. The first two talk about the linkage of urban areas with multi-model transportation for railways, metros, etc., and emphasis on ropeways under Parwat Mala. There is a separate subsection on urban planning, which proposes half of the population living in urban areas by 2047 and therefore, a need for gearing up through change in paradigm and urban planning education. 

The budget calls for the up-gradation of institutions to the Center of Excellence. Urban planning exercises in the post-independent period started with architects and not regional planners. The term ‘regional planning’ came late when the School of Planning and Architecture was established. Prof Mahalaya appreciates and welcomes the decision of the government to change the paradigm through the union budget. 

However, the backlash is that Indian projects and policies often exclude small cities and towns (starting from the middle tear) and allocate maximum resources and infrastructure to metropolitans and megacities. The paradigm change should start by bringing smaller towns and cities into the mainstream planning process. It should also be recognized that urban planning is multidisciplinary. Prof Mahalaya concluded by saying that there should be greater emphasis on urban land and land policy from environmental and ecological preservation in the medium run, if not through the union budget. 

Dream Budget for Urban Planners

Prof Chetan Vaidya, Independent Urban Advisor; Former Director, School of Planning and Architecture (SPA), New Delhi and National Institute of Urban Affairs (NIUA), New Delhi, highlighted how he did not have many expectations from this year’s budget but the budget did a good job on focusing urban planning through establishment of Centre Of Excellence, facilitating small and medium cities, sustainable transport, oriented development and town-planning scheme. He believes that it’s a dream budget for urban planners and economists. 

Additionally, there is an increase of almost 35% in capital investment in infrastructure which will impact long-term interest-free loans to states and further forwarded to cities. The budget also focuses on ease of doing business which would mean online building plan approval, digitization of land records, and simplification of trade licenses. Green bonds and start-up promotion will also impact the growth of cities positively. There is also a mention of foreign universities through GIFT IFSC (international financial services center) in the state of Gujarat. Unfortunately, there is very little increase in the overall budget of the ministry and this minimal increase is only for the PWD Scheme that is under the Central Vista Project. 

There is of course an increase in allocation for Pradhan Mantri Awas Yojana but with no bifurcations based on rural and urban areas. The rental housing program for migrants is not linked to the overall slum-up relation. There has been a very little increase in allocation for National Livelihood Mission and Prof Chetan showed disappointment as he thought this budget would include urban livelihood as part of the mission. Finally. Prof Chetan concluded by saying that we must strengthen public participation and local bodies must be empowered for the inclusive economic development of urban sectors in the long run. 

Contextualising Budget 2022-23

Dr. Vishwa Nath Alok, Associate Professor of Public Finance, Indian Institute of Public Administration (IIPA), New Delhi, picked up four important questions to answer. The first one was about the prevailing economic challenges in the country. This year’s budget is not an ordinary one as it’s released in a very complex environment of health and consequently, an economic shock. There is a high rate of unemployment and job losses. ILO suggests that the unemployment population dropped from 55% in 2005 to 43% in 2020, which is lower than that in Bangladesh, China, and Vietnam. 

Women’s contribution in labor participation is only about 20%. CMI data indicates that India has lost about 1 crore jobs between 2016 and December 2021 (covering not just the Covid-19 pandemic but demonetization and implementation of GST). The data also indicates a large population was pushed into abject poverty (including urban poverty). Quick estimates released on 7th January 2022 suggest that the service sector has registered a very slow growth rate and sectors like trade, hotel, transport, and communication services have registered a negative growth rate. From 2019 to 2022, we have registered a contraction of 8.5% in the growth rate.

Dr. Alok then answered his second question which was about whether this year’s union budget addresses the above-mentioned challenges. Typically, the union government collects the buoyant source of revenue i.e. 65% of total revenue and the state government collects about 35% of the total revenue that includes tax collected by municipal bodies. 

Looking at the expenses, the state government is responsible for most of the services including some of the urban services. Municipalities draw powers from the state government and majorly depend on funds from the union government. The small cities and towns collect only about 5-10% and mostly rely on the transfers from either from union finance commission, the state finance commission, or the verticals. 

The third question is about which proposals of budgets we can analyze. The numbers show that the center’s revenue receipts across taxes and dividends stand at 17.9 lakh crore (higher than budgetary estimates) which implies an impressive performance of organized sectors. Despite higher revenue collection, there is a fiscal deficit of 6.9% (higher than budgetary estimates) due to the expansion of food subsidies, fertilizers, MGNREGA, and export incentives. Dr. Alok believes that a good tax collection can provide fiscal policy freedom to the finance ministry and address various economic challenges mentioned earlier. 

The bigger idea of the budget is to regenerate growth and gainful employment. The government has announced a significant increase in capital expenditure but very little increase in revenue expenditure. Dr. Alok pointed this out as a good decision in terms of urban development. The intention of an increase in capital expenditure is to promote domestic manufacturing. The states have been provided with 1 lakh crore to undertake capital expenditure, which is over and above the devolutions of the Union Finance Commission, revenue deficit grants, and Article 275. 

There is no hike in the health budget as the vaccines have been excluded from the union budget outlay. The budget mentions no provisions for Pradhan Mantri Awas Yojana which aims at providing 80 lakh houses by 2024. Within brackets, it’s been mentioned that this scheme is financed by central road and infrastructure funds. However, in the budget of the ministry of roads, it says that NHAI finances the money, thus implying juggles and manipulations in the union budget. 

Coming to the final question about impediments for the implementation, the administrative machinery of union, state, and local governments plays a vital role. They must work in a tendon, which is the need of the hour in the framework of cooperative federalism. 

Sameer Unhale, Joint Commissioner, Department of Municipal Administration, Government of Maharashtra, made two observations in his speech. First, he said that urban planning and affairs remain a state subject and this must be discontinued for efficient development. Second, he said that the upcoming missions on urban development are focusing on particular sectors. For example, Swachh Bharat Abhiyaan focuses only on sanitation and solid waste while AMRUT strictly focuses on water supply and water treatment. This mission approach, he points out, has shown immense results in the past few years across the country.  

Livelihood: A Miss in Budget 2022- 23

Prof Tathagata Chatterji, Professor of Urban Management and Governance, Xavier University, Bhubaneswar pointed out the need to differentiate the budget into two sections — the future-oriented part that prioritized future goals and commitment to climate change resilience; and the part that addresses more immediate issues about financial allocation to different sector schemes. He said that one of the most disappointing parts of the Budget speech has been urban livelihoods. In the pandemic-induced unemployment crisis, poverty has transferred from rural to urban areas. Hence, the government should stop focusing on rural areas when coming up with poverty schemes. 

Next, he emphasized the need for the empowerment of cities by where cities raise their funds instead of depending on central funding. The process of decentralization, Chatterji suggests, should be done graded. Cities with 50-million-plus urban agglomerations (UAs) should be empowered first to generate employment while second and third-tier cities should come next in line. 

Sandeep Thakur, Associate Professor, and Head, Centre for Municipal Finance, National Institute of Urban Affairs (NIUA), New Delhi, began his speech by pointing out the past performance of cities and their revenue allocation. He mentioned that last year, only after the implementation of the 14th Financial Commission, only 50% of the cities were able to qualify the conditions to get central grants. And with the changing performance grant conditions with each year and Commission, cities get confused over what measures in the city to continue or discontinue. 

Coming to the current 15th Financial Commission, he said that with tightening conditions and lesser available grants, state governments would come under the pressure to make their cuties perform. Thakur highlighted that despite the current Commission being announced in the middle of the pandemic, when cities are experiencing a fall in their revenue, no relaxation has been given to the performance conditions needed to avail grants. He added that these conditions are only going to become more and more stringent, as pointed out in the Budget, in the next few years. 

Aravind Unni, Thematic Lead – Urban Poverty, Indo-Global Social Service Society (IGSSS), Delhi, expressed how he was much happier with the last year’s budget than this year’s. This is because this year’s budget chose a more capital investment-led long-term recovery than more immediate support to marginalized groups who have been suffering due to the pandemic. He said that a better approach would have been a good mixture of long-term recovery and immediate relief. He said that while last year’s b budget speech had mentioned the term ‘workers’ while announcing worker-centric affordable housing policies, they were left behind without any mention of continuing or improving them.

An important observation that Unni made about this year’s budget is that there was no precise mention of the information in the Budget speech, nor any clarity of the figure of the allocated amount. Furthermore, the goalposts in this year’s speech have been shifted to not 2-5 years but 25 years. While this also points towards a more long-term perspective that the government is perhaps adapting, it might be ignoring better measurements to calculator growth in the years before that. 

Finally, Tanaji Chakravorty brought the panel discussion to an end by pointing towards India’s urban narrative that must go beyond mere platitudes. He said that a convergent and multidisciplinary approach towards urban planning is the need of the hour. This entails not just clubbing together various sectors or disciplines but also blurring the lines of distinction between tier 1, 2, and 3 cities. He emphasized that all cities must become the base for urbanization by building a basic-level infrastructure. 

Acknowledgment: Arunima Marwaha is a Research Intern at IMPRI

YouTube Video for Cities and Union Budget 2022-23

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