Open Essay


Jitendra N Bajpai is an adjunct faculty member of Columbia University and a former director of the World Bank
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Why a modern economic vision is incomplete without smart cities

The Modi government’s pronouncement of building 100 smart cities reflects the high priority the Government attaches to the role of the urban economy in nurturing India’s future growth and improving the living conditions of its cities. The available projections suggest that by 2030, the country will add 250 million new urban residents, and its cities will account for almost 70 per cent of India’s GDP.

The spatial footprints of Indian cities and their evolution over time exposes various failures in land management. With organic expansion and inadequate services, cities force long commutes to jobs and are experiencing a proliferation of slums and steady deterioration in living and environmental conditions. Fast-growing cities regularly encounter severe conflicts in their peri-urban jurisdictions over issues of land acquisition, industrial decentralisation, water depletion, urban waste disposal, contamination of soil and aquifiers, and participation in the policy process. Due to limited finances, most cities are struggling even to meet the increasing demand for basic services. Under such conditions, what kind of smart cities should India aspire to? And what will make our cities smart?

To find an answer, I looked at my phone and wondered why it was called a ‘smart phone’. About six years ago, it was simply a cell or mobile phone. It got a new name once it began offering features that served common user needs in addition to standard voice communication—such as internet access, photography, recording services and many other specialised applications to access private services. The increasing smart features of new phones were built over time, on the foundation of mobile communication technology. Taking the smart phone analogy, a smart city must either have in place or build a basic foundation in consonance with an economic vision with necessary amenities and services for its residents and businesses. So, what kind of foundation does a city need?

The history of today’s well-run cities may offer an answer. A historical quest highlights the nature and timing of appropriate actions taken by past leaders of a city over time and how these served as the foundation for smart development. Being a resident of Manhattan, New York, an island city known for its vitality and efficiency, I began to explore the kind of development path it took from a small port city of 32,200 residents in 1790 to today’s megapolis of 8.4 million. The city shifted from an organic pattern of growth to grid-based development following the 1811 Commissioner’s plan. The rectilinear plan of blocks—200 by 610 to 920 feet—with north-south avenues and east-west streets was designed to accommodate a sevenfold increase in land area. But the original city population of 96,000 grew twentyfold by 1900. Such an unprecedented population rise was mainly caused by an influx of mostly poor migrants from Europe and catalysed by the increased access of the port city to its hinterland with the opening of the Erie Canal and the expansion of rail networks in the eastern part of the United States.

To prepare the 1811 Plan, a three member ‘Common Council’, including a surveyor, John Rendell, was appointed by the then Governor Morris. Only state legislatures had the power to approve any changes to the Plan, while New York City decided on new street openings . To assess the value of land parcels and properties, a three-member Commission of Estimate and Assessment was established. A Real Estate Exchange was set up to facilitate auctions and maintain records of public and private land and property. The grid expansion adopted a self- financing scheme to build the road system and to compensate property owners affected by it. Street opening costs were recovered from a frontage fee imposed on land parcels that were facing the street. Later, that was replaced with a property tax. Economic growth and the opening of streets continued to increase property values and related taxes, which grew from $25 million in 1807 to $1.25 billion by 1887. Over a period of 60 years, the landscape of Manhattan, known as an ‘island of hills’ was steadily transformed from a two-dimensional grid of road systems into a three-dimensional city plan of two or three storeyed buildings.

The grid plan served as a foundation for economic and spatial development, but came under criticism for not accommodating nature and open spaces, particularly after a yellow fever outbreak in 1822. The need to alter the grid gained momentum. A blend of public and private interests was mobilised to create neighbourhood parks—the famous Central Park, for example, was opened in 1860. Landowners with property surrounding the parks gained from an increase in property values, and so did the city with the increased property tax revenues. The erosion of the grid continued to create more public squares, recreation facilities, markets and civic centres such as libraries and concert halls.

With the technological advancements of the late 19th century, the skyline of Manhattan changed from two and three storeyed buildings to skyscrapers, and the grid expanded to accommodate underground utilities, subways and also an increasing population of street cars.

Due to rising concerns about urban density, the shadows cast by skyscrapers and congestion of open spaces, New York’s first zoning law was introduced in 1916. The law prescribed permissible building heights, plot coverage and setbacks. By 1961, floor bonuses were offered to landowners to create new public spaces. The city’s zoning norms have evolved in response to its evolving economy, market demand for real estate and emerging safety and environmental concerns.

Since the grid was failing to adequately facilitate north-south travel, two private subway lines opened in 1908. The city opened another new subway line to expand services to outskirts which then became home for poor inner-city migrants and, at the same time, reduced overcrowding of the island. By 1953, all subway lines were brought under a public corporation. Over time, one of the world’s largest subway systems was built to support the grid. Today, it serves 4.5 million daily riders. New Yorkers have also been beneficiaries of the city’s strict rules for sidewalks, which must be 10 to 19 feet wide depending on street widths, and its special provision of a 200-mile bicycle lane.

To sustain economic vitality, New York City continues to redefine its vision and development strategies. For instance, its present efforts are directed at spurring technology industries. The city has won admiration for many of its steps towards ecological sustainability as well, including its carbon emission reductions, safeguards against natural disasters and greening efforts while promoting the expansion of jobs available. The emergence and extensive use of information technology has added a fourth dimension of virtual public and private services offered to its residents, covering e-governance, information on civic services, and so on.

The history of New York City, as for all cities, is unique. Perhaps it is not relevant for the Indian urban scenario. But it does provide a few broad lessons which are generic in nature and may serve as building blocks for city planning and management in India. The New York story illustrates how an initial grid-based system evolved over time in response to ever-changing urban requirements without losing sight of the development vision. Its success largely depended on appropriate institutions for planning, financing, execution and public participation in decision-making.

Planning begins by defining a city’s long- term vision. An assessment of strengths, challenges and opportunities helps the city shape the economic dimensions of that vision—which must reflect the views of key stakeholders, including public agencies, private players, civic actors and neighbourhood organisations.

An inclusive planning process translates the vision into an agenda that is doable, affordable and rational, and is designed to address the key issues of the city’s productivity, inclusiveness and resilience. The anticipated demographic changes and path of development determine the agenda’s specifics to be executed under the given environmental and topographic constraints.

In India, city master plans—technical documents that set down land-use and premissible density limits—have been prepared for over 2,000 Indian towns. But many of these plans have not been implemented for lack of local resources and support. In many cases, the plans have been flouted with impunity. The construction regulations under these plans, in particular the Floor Space Index (FSI), have been restrictive and unresponsive to location-specific demand for extra space in crowded Indian cities. Most cities have maintained low FSI levels, almost one-fifth to one-tenth of other cities in the world, with the result that there is just not enough usable space built on each unit of land area to house people and offices. The widening gap between floor space supply and its demand has pushed property prices sky-high. Proper housing being out of the reach of so many has resulted in the formation of unauthorised slums. High prices in central areas also push a city to expand outwards, with people opting to live in lower-cost suburbs and commute long distances to work. This is not a sign of land-use efficiency. City residents who move to outer areas are disproportionately affected by rising transport costs and often suffer reduced access to centrally located jobs and amenities.

For fast-growing cities, the projected urban expansion often extends beyond their present political boundaries. In such cases, it is essential to either extend these or create a coordination framework—a metropolitan authority, for example—across a set of local bodies. But only a few large Indian cities have so far established a metropolitan agency, such as Mumbai’s Metropolitan Regional Development Authority.

Since land is one of the main inputs of economic expansion, cities must manage its use well and minimise the effects of congestion, be it pollution or crime. Land is also a primary source of local revenue, and its potential must not be overlooked. A study of 36 Indian cities suggests that on average, property taxes— excluding arrears, which are significant—yield only Re 1 per head per day for municipal corporations, making up just 28 per cent of total municipal revenues. These figures are abysmally low. Urban India’s potential for greater property tax collections is enormous if evaluation and indexation systems are improved and no taxable property is allowed to slip through the net. Digitisation of information plays a key role in this.

Between 1991 and 2001, Bangalore increased its property tax revenue by 33 per cent by upping its collection rate and number of assessed properties. This was aided by the introduction of a new property evaluation method and the adoption of infotech tools for property records and tax billing. Thus, an improved property tax regime holds great promise for generating local finances for new urban infrastructure and services by capturing increasing land values. Since property prices also rise in response to better civic amenities and connectivity, this can set off a virtuous cycle for the city’s overall benefit. But to build an efficient land-and-property-based financing mechanism, a city must have an independent property registration and valuation system. In this respect, the experience of the West Bengal Central Valuation Board may prove valuable.

Since a private land market is likely to be more efficient than a state-dominated one in determining what tracts of land are used for what (and when), the role of a city government and its planners should be to enforce safety and environmental regulations while reading property prices as signals of which way the balance of demand and supply is going in a particular area with a view to minimise market failures, if any. Failures could have a negative impact on the local economy, and even the area’s liveability in terms of availability of affordable housing, traffic congestion, overcrowding, health and safety.

The old paradigm of top-down planning to control land use and density deserves to be replaced by participatory and incentive- based mechanisms (such as the transfer of development rights, tax exemptions, public-private partnerships and permissions for mixed use) to channel private investment in real estate while addressing social, civic and environmental concerns.

The smartness of a city will thus depend on how well it prepares its 2-D foundation of land development to serve its economic vision, manages its transformation to the third dimension of skylines, and adapts to the dynamics of change (including new technologies of the fourth virtual dimension) to better serve its residents and economic actors.

The future of a city depends on today’s vision, but translating this vision to reality requires broad support, appropriate institutions and collaboration across city service agencies and various levels of government, with public officials keeping open minds on innovative solutions and practices.

I hope Indian cities will be empowered to pursue their vision as envisaged under the 74th Constitutional Amendment, and be fiscally empowered as well to generate local revenues for building smart foundations for urban development while staying accountable and responsive to local voters. An empowered and well-governed city will break the silos that assorted service agencies and other entities operate in, and bring them all together in a common effort to realise a larger vision of smart urban development. But to sustain momentum towards the agreed vision and allow for mid-course corrections, they will need a planning and execution regime that is inclusive and citizen-centric. And finally, how smart Indian cities become depend on the quality of their local leadership.