By 2036, 40 percent of the population of the country will be living in urban cities across the country. 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 and road transport, among others. Currently, only 5 per cent of the infrastructure needs of Indian cities are being financed through private sources of which 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.
“Cities in India need large amounts of financing to promote green, smart, inclusive, and sustainable urbanisation. Creating conducive environment for ULBs, especially large and credit worthy 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," informed, Auguste Tano Kouamé, Country Director, World Bank India.
To keep up with the growing population, the report has recommended 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 percent 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.