Kala S Sridhar: Beyond the Budget

Allocation of financial resources does not solve all problems.

What does the Budget mean? Sure, the Budget is about national finances. Apart from a rise in the gas prices or a reduction in taxes, the Budget can do something to affect the long-term framework within which the economy operates.

But can it change the conditions under which a large number of people live "" those who perhaps do not even know that there is something called the Budget?

Consider this: a study commissioned by the Municipal Corporation of Delhi regarding the living conditions of those living in slums and clusters found that the monthly income of the slum-dwellers was in the range of Rs 1,200 to Rs 1,500.

The dwellers were mainly employed in the informal sector and hailed mostly from Uttar Pradesh and Bihar, implying that they are largely migrants who moved to Delhi in search of jobs.

It is this continual stream of migration into urban areas that explains the increasing size of many towns that have become urban agglomerations (UAs) over the decade 1991-2001.

According to the Census of India, 2001, over the decade 1991-2001, the number of UAs in the country increased from roughly 275 to 375, implying that the number of slums is also constantly on the rise.

Slums are caused by excessive rural-urban migration, which, according to the Census, increased from 33,441,000 in 1981 to 39,910,000 in 1991, showing a 19 per cent increase over the period (migration data is from the 2000 Census is not yet available).

When we consider the fact that slums are areas in which buildings are not fit for human habitation, and lack ventilation, light or sanitation facilities for various reasons (such as dilapidation or overcrowding) that are detrimental to health and safety, migration assumes increasing importance.

Has rural-urban migration or over-urbanisation created slums in other countries? The United Nations recently reported that 19.6 per cent of urban Mexicans live in slums. Residents of slums constitute a staggering 78.2 per cent of the urban population of the least developed countries and fully a third of the global urban population.

The world's highest percentages of slum-dwellers are in Ethiopia (an astonishing 99.4 per cent of the urban population), Chad (also 99.4 per cent), Afghanistan (98.5 percent) and Nepal (92 per cent).

The five great metropolises of south Asia (Karachi, Mumbai, Delhi, Kolkata and Dhaka) alone have about 15,000 distinct slum communities with a total population of more than 20 million, according to data from some recent studies.

At the other end of the spectrum, we also observe urban decay. There were a large number of places that were UAs in 1991 that are no longer UAs, but only towns, as of the 2001 Census.

This decay process has been continually going on over the decades as is apparent from Census reporting. One reason why this could occur is due to out-migration, when the cities' economic performance declines, as may be evident in the closure of industries, and they become ghost towns.

How can we limit the negative effects of over-urbanisation that manifest in the form of slums and poor living conditions? In this effort, we need to limit the other extreme "" urban decay "" as well.

Governments of countries everywhere should minimise rural push through the creation of smaller and medium-sized towns with suitable infrastructure.

Ours is a large country with plenty of land waiting to be used in several parts of the country. The casual traveller will notice this. We can do a little more than speaking regarding the pressure of population on land.

How can we develop this land for the better of humanity? We need to liberalise land laws and abolish rent control, facilitate further private and foreign direct investment in real estate.

Evidence suggests that it is an expensive affair for the government to solely manage land acquisition because of the provision of compensation.

The Urban Land (Ceiling and Regulation) Act, 1976, despite being repealed by the Centre with effect from January 11, 1999, continued to be in force in the states of Andhra Pradesh, Assam, Bihar, Orissa, Maharashtra and West Bengal, even as of August 2002.

This law is used to build an adequate stock of urban land for "public interest" purposes such as widening the roads, development of open spaces and other "public" facilities.

Further, rent control has thwarted the effective development of the land market by limiting property owners' incentives to maintain and renovate property.

Further, quite similar to the states, cities also can compete in the provision of municipal services such as roads, public safety, street lighting, water, sewerage and solid waste disposal.

This can enable cities to market themselves as good places for particular kind of firms, depending on their specialisation. Cities that can excel in water and sanitation services can become hubs of water-intensive firms.

Similarly, cities that have a large pool of skilled labour force and offer amenities can become bases for the IT industry and many IT-enabled services. For this competition to occur, the bottom-line appears to be the adequate provision for public services.

However, there are a number of constraints for cities to provide adequate levels of public services such as water, without raising the user charge.

This is because cities have to approach the state government for all tariff revisions. Sometimes populism does not allow such tariff revisions to occur.

Removal of such institutional barriers will make cities compete for firms as well as people that care about the quality of public services.

For this, cities need functional autonomy in the true spirit of the 74th Constitutional Amendment Act that formally recognised municipalities as the third tier of government. This is just a note to remember that in a democracy like ours, allocation of financial resources is not everything.

(The writer is with the National Institute of Public Finance and Policy. Her email is: kala@nipfp.org)