Dharavi in 2002:

Dharavi in 2010:

Outbursts of growth in the slum pocket of Mumbai. It is good to see India acquiring a fancy skyline but it is disheartening to see the condition of slum dwellers.

Cornerstones

Population aged under 15 years in 2005:

Sourced from Wiki: http://en.wikipedia.org/wiki/Youth

In a country like India, with over 400 million youth by 2022, the three most important policies that form the cornerstones of an economy include:

Basic Education Needless to say basic education, expected to be achieved through the Right To Education Act, is the most important step that has been taken in this direction.

However, it is unlikely that Indian economy can provide so many white collar jobs and therefore may result in inadequate returns to education. Besides, of course the issue of supply of education remains, after all only so many graduate out of the IIT and IIM. What is required is vocational training.

Given that cities are the places where a large proportion of this youth is likely to be employed, Housing policies assume as much importance as the above two. With the present land demand and supply dynamics, the real estate costs make it prohibitive for a large proportion to access affordable housing. Capabilities that enable one to earn livelihood but not enough to afford shelter are rendered useless! Constant exclusion makes white collar jobs with remunerative returns seem like the only solution to the issue of housing in cities. Govt. policies targeted towards provision of low cost housing are thus the third supporting pillar.

13 million hectares of forest land was diverted for non forest purposes each year between 2000 and 2010 according to the World Forest Resources Assessment (FRA) Report (also see 550 years, published Oct'10).

This piece is about the value of the forest resources.

Determining the value of Indian forests was a long drawn process, a Supreme Court referred committee estimates, which were to be vetted by the Central Govt. established committee.

The Central Empowered Committee placed a value of Rs 8 lakhs on a hectare of average forest land. More productive or more dense lands have a higher value, 8 lakhs scaled up by factor based on ‘judgment’. The process needless to say is non transparent and needs revision.

According to the FRA, revenue derived from forests is close to world average. Also, the value of fuel and wood products from Indian forests is relatively higher in India as compared to other countries.

The chart below shows per hectare forest revenue collected by country (2005, progressively darker implies a higher revenue, Source: FRA)

Sorry state of state finances

High Powered Expert Committee estimates requirement of Rs 39 lakh crores for urban infrastructure and a further Rs 20 lakh crores for operations and maintenance (O&;M) expenditure over a period of 20 years (in 2009-10 prices, all estimates exclusive of land acquisition charges).

The funding for the investment requirement envisages significant Urban Local Body (ULB) contribution. And obviously, this assumes immediate, effective reforms. Some of the most radical of envisaged reforms include introducing a ‘Local Bodies Finance List’ in the Constitution and empowering ULBs with ‘exclusive’ taxes including a property taxes, right to sell additional Floor Space Index, entertainment taxes etc. O&;M expenditure should be recovered through user charges.

The current situation is far from the ‘vision’. The three points of divergence that jump out are:

• The Perfunctory State Finance Corporations - SFCs are required which are required to set a formula for the devolution of state revenues to local governments. However, often the recommendations are not implemented. Besides, the recommendations themselves are reportedly prepared with half baked efforts – inadequate technical and financial resources.

• States’ cash management is erratic as is often seen in the surplus parked in 14 days intermediary Treasury Bills (which often has repercussions for the Central Government cash management!) and its drawls from the Small savings pools concentrated in the last quarter of the fiscal year. At the aggregate level state governments carry huge cash surplus which is suspected to be grossly imbalanced at disaggregated levels considering the bond issuances by states continue through the year (despite observed levels of surplus).

• ULB finances are thoroughly battered. Inferred from various examples from the report, user charges recoveries are highly inadequate. Water user charges for example, cover less than 35% of operating costs in India, compared with 100% in Philippines and Cambodia and 64% in Bangladesh. On an average, user charges cover less than 50% of O&M costs.

Rare success stories regarding imposition of user charges in India exist and should be replicated. Gulbarga in Karnataka provides round the clock water to the residents but imposes charges that cover expenditures. International success stories are more abundant.

ULB Finances need to be strengthened as a pre condition for any perceivable step up in urban infrastructure investment and for accessing any forms of external finances. Municipal bond market, which is extremely virtually nonexistent in India, but much needed, can only then be developed.

Fiscal implications of RTE

The GoI has enacted the RTE with a vision to provide ‘free’ elementary education (class one to eight) to ‘each’ child in the age group six to fourteen. Capital task, the need of the hour, particularly in view of the demographics of India where over 35 crores, currently in the zero – fourteen age group will add to work force over the next fifteen years.

However, RTE will have large fiscal implications, as the Govt will need to step up its education expenditure. Expenditure will rise on account of existing schools with current enrolments to become RTE norms compliant (in terms of infrastructure, number of teachers etc). Further, ‘compulsory’ education will entail students currently out of schools to be enrolled; new schools will need to be built and additional teachers employed. The act looks to provide training and learning material to teachers and schools. ‘Free’ education will entail reimbursing students’ textbook, writing material and uniform costs.

To see detailed estimates for two components of total costs - infrastructure and teachers, for govt. schools in rural India, please see:

http://www.accountabilityindia.in/sites/default/files/state-report-cards/paisa2010report.pdf

Demographic estimates from 'Indian Demographic Scenario, 2025' by Prof. P N Mari Bhatt

The life you wouldn't want...

8.9 mn shelterless households in India by 2012.

Picture above of squatters outside Mumbai local train station. (Source - Author)

In 2007, the housing shortage was estimated to be 24.7 mn housing units. Of this, new housing units requirement was estimated to be 7.5 mn. About 15 mn housing units were estimated to require upgradation or expansion. Over 2 mn houses were estimated to be in a 'bad' condition, or over 80 years old, requiring replacement. By 2012, shelterless households are estimated to increase to 8.9 mn and the housing shortage to rise to 26.5 mn units.