India must invest $840 billion over the next 15 years in urban infrastructure: World Bank report

According to a World Bank report titled “Financing India’s Infrastructure Needs: Constraints to Commercial Financing and Prospects for Policy Action,” India will have to invest $840 billion over the next 15 years or an average of $55 billion per annum—into urban infrastructure in order to meet the needs of its fast-growing urban populations. The report also emphasises on the need for the country to leverage more private and commercial investments in order to meet the emerging financial gaps.

By 2036, 40 per cent of the population of the country will be living in urban cities in India. The pressure of 600 million people on the already stretched urban infrastructure and services of Indian cities will lead to an increased demand for clean drinking water, power supply, road trasport among others.

Currently, only 5 per cent of the infrastructure needs of Indian cities are currently being financed through private sources. Out of this, the central and state governments finance over 75 per cent of city infrastructure, while urban local bodies (ULB) finance 15 per cent through their own surplus revenues.

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“Cities in India need large amounts of financing to promote green, smart, inclusive, and sustainable urbanisation. Creating a conducive environment for ULBs, especially large and creditworthy ones, to borrow more from private sources will therefore be critical to ensuring that cities are able to improve living standards of their growing populations in a sustainable manner," Auguste Tano Kouamé, Country Director, World Bank, India, said in a press statement issued.

In order to keep up with the growing population, the report has recommeded an expansion in the capacities of city agencies to deliver infrastructure projects at scale. As of now, the ten largest urban local bodies have been able to spend only two-thirds of their total capital budget over three recent fiscal years.

A weak regulatory environment and weak revenue collection also adds to the challenge of cities accessing more private financing. Between 2011 and 2018, urban property tax stood at 0.15 per cent of GDP compared to an average of 0.3-0.6 per cent of GDP for low- and middle-income countries. Low service charges for municipal services also undermine their financial viability and attractiveness to private investment.