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Cities, Local Governance, And Interim Union Budget 2024-25 – IMPRI Impact And Policy Research Institute

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Cities, Local Governance, and Interim Union Budget 2024-25

Press Release

Vaishali Singh

The IMPRI Center for the Study of Finance and Economics (CSFE),  IMPRI Impact and Policy Research Institute, New Delhi, hosted an interactive panel discussion on the topic “Cities, Local Governance, and Interim Union Budget 2024-25” on 3 February 2024, under the IMPRI 4th Annual Series of Thematic Deliberations and Analysis of Union Budget 2024-25, as part of IMPRI #WebPolicyTalk. 

In the session chaired by Dr. Rumi Ajazji, a Senior Fellow and Head of the Urban Policy Research Initiative at  Observer Research Foundation (ORF), the focus was on the interim budget and its implications for urban development. Dr. Ajazji highlighted that this budget is temporary, with the final one expected in three months after the general elections. He analyzed the budgetary allocations, noting consistency across various heads and some additions.

The key observations included an increase in the allocation for the Ministry of Housing and Urban Affairs, signaling a positive step for urban issues. Notably, the Prime Minister Awas Yojana Urban (PMAY-U) and Metro projects received a higher share, emphasizing their significance in the government’s urban agenda. Dr. Ajazji also pointed out the substantial increase in the budget for the Swachh Bharat Mission Urban, while acknowledging a decrease in allocations for the Smart Cities Mission as it nears its completion.

Other significant areas discussed were the emphasis on green energy, electric vehicles, and the National Urban Digital Mission, reflecting emerging challenges and priorities in urban development. Dr. Ajazji concluded by welcoming the distinguished panel of speakers, highlighting their valuable insights and contributions to the field of urban studies.

After the preliminary remarks of Dr. Rumi Ajazji, discussion was taken forward by Prof Chetan Vaidya, an Independent Urban Advisor; Former Director, School of Planning and Architecture (SPA), New Delhi and National Institute of Urban Affairs (NIUA), New Delhi. In his insightful session, he aptly views the budget as a short-term measure, stressing the need to analyze it within that context.

While acknowledging a reduction in funds for Smart Cities by almost 20%, he optimistically believes that these programs are slated to conclude in June. Noteworthy is the substantial increase in allocations for the Swachh Bharat Mission, reflecting a positive commitment to a cleaner India. Expressing concern over the National Livelihood Mission’s oversight, he finds solace in the Street Vendors Scheme potentially covering part of its scope.

Prof. Vaidya aligns with the identified challenges of green energy, electric vehicles, and the National Urban Digital Mission, appreciating the latter’s establishment at NIUA. He highlights recent Prime Ministerial schemes for rooftop solar energy and housing for the middle class, underscoring their positive impact on urban development. Emphasizing the need for a holistic approach, Prof. Vaidya advocates for collaboration between ministries and local bodies, stressing the importance of developing unified plans to harness available schemes and grants effectively.

In Prof. Kala S. Sridhar’s, Professor, Centre for Research in Urban Affairs, Institute for Social and Economic Change (ISEC), Bengaluru session, she focused on key policy measures in the interim budget, particularly highlighting the government’s emphasis on urban transformation. She acknowledged the temporary nature of the interim budget but emphasized its significance in setting the tone for incremental and balanced urban development.

Prof. Sridhar commended the Finance Minister’s recognition of micro, small, and medium enterprises (MSMEs) and their pivotal role in fostering balanced urban growth. Drawing from her research, she underscored the positive impact of promoting MSMEs in smaller towns to mitigate extreme urban primacy seen in cities like Hyderabad and Bangalore.Additionally, Prof. Sridhar discussed the importance of the Udan scheme, which aims to enhance air connectivity to small and medium-sized towns. She linked improved regional connectivity to reduced urban primacy and balanced regional development, emphasizing the positive economic outcomes of enhanced collaboration and increased productivity in smaller towns.

The session also delved into the significance of metro rail projects in large cities. Prof. Sridhar highlighted the challenges posed by the sprawling nature of Indian cities, leading to increased travel times. She applauded the Finance Minister’s emphasis on metro rail projects, noting their role in providing speedy and cost-effective access to jobs, thereby contributing to economic efficiency and inclusive urban development.

In conclusion, Prof. Sridhar praised the budget for its balance between economic efficiency, political considerations, and the incremental nature of an interim budget. She expressed optimism that a seamless policy agenda for urban transformation, if continued, could pave the way for India to achieve developed nation status by 2047.

In Prof. Mahalaya Chatterjee’s,  Professor, Centre for Urban Economic Studies, Department of Economics, University of Calcutta insightful session, the focus was primarily on dissecting the nuances of the interim budget and unraveling its implications for the realm of urban development. She commenced her talk by reminding the audience of the inherent transitory nature of the interim budget, cautioning against harboring excessively high expectations.

Prof. Chatterjee astutely observed that, aside from specific missions like Swachh Bharat and PMAY-U, there seemed to be a continuity in allocations, with marked emphasis on infrastructure development.Delving into the details of the budgetary allocations, she acknowledged the substantial increase in the allocation for the Ministry of Housing and Urban Affairs, signaling a positive step for those vested in urban affairs.

The specific emphasis on missions such as Swachh Bharat and PMAY-U, despite a slight dip in allocations for the Smart Cities Mission, showcased a strategic allocation of resources, aligning with the broader goals of urban transformation. Prof. Chatterjee astutely touched upon the challenges posed by urban sprawls, emphasizing the need to bridge the gap between rural and urban planning. She proposed an integrated approach that considers peri-urban areas, which often fall through the gaps in traditional rural-urban classifications.

The distinguished speaker suggested that the time might be ripe to contemplate projects that transcend the rural-urban divide, especially given the impending release of the 2021 census data, which may reveal shifts in settlement patterns. Drawing attention to transportation projects, Prof. Chatterjee highlighted their profound impact on urbanization, underscoring the need for a holistic strategy.

The session concluded with a call for a unified and cohesive approach that considers the evolving dynamics of settlement patterns, the introduction of new services, and the indispensable role of local bodies in shaping urban development.In essence, Prof. Chatterjee’s comprehensive analysis provided valuable insights into the urban implications of the interim budget, stressing the importance of integrated planning, innovative approaches, and a nuanced understanding of the multifaceted challenges and opportunities that the evolving urban landscape presents.

In Professor Manjula Bharathy’s, Professor & Dean at School of Habitat Studies, Tata Institute of Social Sciences, Mumbai thought-provoking session, a unique blend of practical and ideological perspectives on local governance in cities and its budgetary implications unfolded.

With an insightful analysis, Prof. Bharathy underscored the pivotal role of the budget in shaping the political and economic trajectory of the government. She aptly noted that even though the interim budget might not explicitly delve into city governance, it holds critical significance when viewed through an ideological lens, especially amid India’s accelerated urbanization.

Professor Bharathy delved into the historical evolution of governance, emphasizing the transition from the city-state to the nation-state and its contemporary manifestation in neoliberal governance. She deftly connected this evolution with present-day challenges such as climate change, disasters, and socio-economic inequalities. The speaker astutely questioned the governing techniques and resilience-building measures for marginalized and vulnerable communities within the urban landscape.

Taking a closer look at the budget’s impact on gender, Professor Bharathy highlighted the need for women-centric policies and their effective implementation at the local level. She questioned the budget’s effectiveness in addressing the rising inequalities, both socio-economic and gender-based, and the urgency to bridge the gaps in local governance.The session extended to Professor Bharathy’s work on localizing the Sustainable Development Goals (SDGs), focusing on health, gender, water and sanitation, urbanization, and climate change. She shed light on the challenges faced by local governments in Maharashtra, emphasizing the disparity between devolved functions and actual powers wielded by urban local bodies.

Critically examining the budget, Professor Bharathy raised concerns about reduced allocations for schemes benefiting the Scheduled Tribes (STs) and Scheduled Castes (SCs). She delved into the issue of disaster management and its insufficient emphasis on the role of local governance institutions during the mitigation phase. The reduction in budgetary allocations for central urban projects like AMRUT and the Smart Cities Mission also drew attention, indicating potential challenges for urban development.

In conclusion, Professor Manjula Bharathy called for a renewed commitment to decentralized governance, highlighting the importance of empowering local bodies and acknowledging their role in disaster management and resilience-building. She emphasized the need for social democracy in urban governance, where the vulnerable and marginalized populations receive special attention. The session illuminated the intricate interplay between budgetary allocations and the complex landscape of urban governance, leaving the audience with a nuanced understanding of the challenges and opportunities ahead.

In Dr. Joy Elamon’s, Director-General, Kerala Institute of Local Administration (KILA), Thrissur insightful session on the interim budget, he noted the absence of spectacular announcements, especially in the pre-election month, making it an intriguing observation. While the budget speech did contain certain statements, such as catering to the urban middle class for house ownership, Dr. Elamon raised crucial questions about the implications for the federal nature of the country and its impact on local governance.

He expressed concerns about the budget’s tendency to circumvent cooperative federalism, emphasizing a trend towards centralizing fiscal powers. Dr. Elamon critically examined decisions like continuing special assistance schemes for capital expenditure for states and highlighted the challenges posed by branding of schemes. He traced the evolution of governance post the dissolution of the Planning Commission and the move away from five-year plans, pointing out that now, the center announces schemes, leading to issues in the branding and implementation by states.

The session delved into the 74th amendment, questioning its position in the current scenario and expressing skepticism about its effective implementation. Dr. Elamon touched upon the challenges faced by urban areas, including issues related to climate change, disaster management, and the impact on sustainable development goals. He questioned the budget’s stance on migration, migrant laborers, and urban unemployment, urging for a more comprehensive approach.

Expressing concerns about the fiscal health of local governments and the need for professionalizing urban administration, Dr. Elamon emphasized the importance of empowering local bodies. He pointed out the changing dynamics of competitive schemes, where states and local governments now have to compete, leading to increased corporatization and an overarching trend towards centralization. Dr. Elamon’s session provided a critical examination of the budget, shedding light on issues related to local governance, urban development, and the broader implications for the country’s federal structure.

In Dr. Jawed Alam Khan’s, Thematic Lead – Fiscal Decentralisation, Centre for Budget and Governance Accountability (CBGA), New Delhi session, he provided a critical analysis of the union budget, focusing on the challenges faced by local governments, particularly in rural areas, over the last two decades. He emphasized the need to shift the focus from budget estimates to actual expenditure details, stressing the importance of timely and quality utilization of funds allocated to different schemes and departments.

Dr. Khan highlighted the recurring issue of underutilization of budgets and expressed concerns about the lack of improvement in the quality of utilization. He scrutinized the budget’s emphasis on rural housing and women’s ownership, pointing out that while there were commitments and announcements, the actual allocations for schemes like the National Rural Livelihood Mission and Pradhan Mantri Awaas Yojana did not see significant increases.

The session shed light on social security schemes, particularly those related to pensions, which Dr. Khan observed had not seen substantial increments, considering the large rural population dependent on them. He questioned the progress towards becoming a developed nation by 2040 while noting the ongoing challenges faced by marginalized sections, such as disabled individuals, elderly people, and widows.

Dr. Khan also examined the evolving landscape of centrally sponsored schemes, expressing disappointment at their centralization and the diminishing role of local governments. He raised concerns about the sidelining of the 73rd amendment, rendering local governments less autonomous, and the need for a serious discussion on people’s planning and local budgeting. Dr. Khan concluded by emphasizing the importance of empowering local governments, reiterating that the lack of predictable funding and control over expenditures diminishes the effectiveness of grassroots planning and development initiatives.

In Prof. Tathagata Chatterji’s, Professor of Urban Management and Governance, Xavier University, Bhubaneswar comprehensive session, he delved into a detailed analysis of the interim budget, addressing four pivotal areas shaping India’s developmental transformation: digitalization, infrastructure and connectivity, climate change and environmental concerns, and demographic changes.

In the realm of digitalization, Prof. Chatterji applauded the allocation of funds—1,450 crores—under the National Urban Digital Mission. He contextualized this as a crucial step, highlighting the shift from the expiring Smart Cities Mission to the National Urban Digital Mission. He emphasized the importance of enhancing city services, improving urban data quality, and efficiently managing financial allocations.Moving on to infrastructure and connectivity, Prof. Chatterji acknowledged the government’s focus on logistics, transportation, and regional metro connectivity.

He underlined the urban dimension of these initiatives, citing metropolitan regions as crucial nodes in transportation hubs. He urged a balanced approach to ensure transit-oriented development (TOD), emphasizing the significance of local governments in planning densification around transit hubs.Environmental concerns took center stage as Prof. Chatterji scrutinized the budget’s limited emphasis on improving the environmental conditions of Indian cities. While acknowledging mentions of electric vehicles and rooftop solar, he stressed the need for massive funds and local capacity development to address issues like heat stress, air pollution, and urban flooding.

Expressing concern, he noted the growing role of external consultants and urged a simultaneous focus on enhancing local government capacities.Lastly, Prof. Chatterji highlighted the demographic changes unfolding in India, with a significant youth population migrating from rural to urban areas. He expressed disappointment over the lack of specific provisions for urban livelihood support in the budget.

While acknowledging the increase in funds for Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), he called for a parallel focus on urban areas, particularly the National Urban Livelihood Mission.Overall, Prof. Tathagata Chatterji’s session provided a nuanced examination of the budget, emphasizing the need for comprehensive approaches to digitalization, infrastructure, environmental concerns, and urban livelihoods to propel India’s developmental transformation.

In Mr. Sameer Unhale’s, Visiting Senior Fellow, IMPRI; Urban Expertsession on the interim budget, he delved into several critical aspects of urban governance and financial management. Firstly, he acknowledged the constraints of the interim budget, recognizing that the substantive policy directions might be clearer in the upcoming regular budget. He identified two significant focal points—urban livelihood and the potential second phase of the Pradhan Mantri Awas Yojana (PMA), with an emphasis on addressing the housing needs of the middle class and slum dwellers.

One noteworthy proposal made by Mr. Unhale was the adoption of double-entry accounting principles at the municipal level. This suggestion aimed to enhance financial reporting granularity and align with the shift toward a voluntary accounting system. This could potentially offer more detailed insights into financial transactions and contribute to better financial management practices at the municipal level.

Mr. Unhale contextualized the prevalence of missions in India’s urban policy landscape, tracing their origin back to the mid-2000s. He underscored the constitutional framework’s impact, particularly the fact that urban local bodies, despite the 74th constitutional amendment, still remain part of the state list. This has led to a reliance on centrally sponsored schemes to address urban challenges.The discussion also touched on the need for a substantial leap forward in India’s urbanization strategy, anticipating the challenges and opportunities in the coming years.

The speaker emphasized the importance of research within the missions and suggested integrating a visible research element into the Information, Education, and Communication (IEC) component. This inclusion could potentially unlock funds for academic institutions and think tanks. Furthermore, Mr. Unhale highlighted the pivotal role of municipal engineers, accountants, and tax officers in driving urban transformation. He stressed the necessity of focusing on their capacity building, recognizing them as the key players at the mid-level of municipal governance. The session also advocated for exploring financial avenues beyond grant financing, particularly for municipal finance, and called for a comprehensive evaluation of budget implementation and impact through performance budgeting.

In conclusion, Mr. Sameer Unhale’s session provided a nuanced and comprehensive perspective on the interim budget, advocating for reforms in financial reporting, research integration, and an in-depth evaluation of the impact of budgetary allocations on urban governance and development.

After a Q&A session, the program was concluded with closing remarks by Dr. Rumi Ajazji, who thanked and praised the IMPRI Impact and Policy Research Institute team for hosting a successful panel discussion and ensuring the smooth functioning of the event. 

IMPRI’s 4th Annual Series of Thematic Deliberations and Analysis of Interim Union Budget 2024-25

Watch the event at IMPRI #Web Policy Talk

Cities, Local Governance, and Interim Union Budget 2024-25

Vaishali Singh is a Research program & editorial associate (visiting) at IMPRI.

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