Hyderabad India January 2003

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Hyderabad IndiaJanuary 2003

• By
• Robert M. Buckley
• Housing Sector Advisor
• The World Bank

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Urbanization is at least a

• Concomitant, and probably a prerequisite to
  development and growth.

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Urbanization is also essential for equitable
growth

• This is so because it is cheaper to provide most
  basic services to large numbers of users.

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The Basic Services

• Nutrition
• Health
• Education
• Water/Sanitation
• Housing

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Urbanization is also a Spontaneous Self-Directed
Process

• So, what then is the problem?
• People should be able to sort out their options
  and move to a city if they so choose.

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For Spontaneous urbanization to contribute to
equitable development

• Prices need to be able to allocate people across
  and within cities so that
• within cities, locations are used most
  efficiently and
• Across cities, people are able to move to exploit
  opportunities.

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However,the Controls on India Cities have

• prevented locations within cities to be developed
  efficiently and
• slowed down, and perhaps prevented, people from
  sorting out their options and moving to cities.

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For instance, Indian cities have been controlled
by

• The Land Ceiling Act
• Development Authorities
• Rent Control
• Housing Boards
• License Raj
• Little Local governance
• The result has been..

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Mumbai
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Paris/Moscow
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In addition, Indias poor are unable to exploit
better opportunities elsewhere as the can in

• The United States
• Japan
• Europe
• Brazil and Latin America
• In the OECD countries the income of the poor
  catches up with that of the rich halving the
  difference in 35 years in Brazil it takes 70
  years to do so.

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In India there is no convergence between income
levels

• As a result, the poor do not vote with their
  feet and thus catch up with the rich.
• Why does this occur
• Policy?
• Geography?

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Lack of Convergence

• We do not know why there isnt convergence in
  India, .
• but we do know that policy adversely affects
  Indian cities.

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We know that because of urban policies, Indian
cities are

• Spatially larger
• More polluted
• Have significantly higher land and transport
  costs and
• Provide very low urban service levels.

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The Cost of Urban Policy

• Thus, the costs of Indias planned and highly
  controlled urbanization process is undoubtedly
  very high.
• Moreover, if these policies prevent convergence
  in incomes across locations, they may prevent
  the achievement of equitable growth

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What can be done

• First, much greater room for greater reliance on
  prices to allocate resources
• Policies such as the Urban Reform Initiative Fund
  are important. So too are local regulations, e.g.
  FARs

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What can be done

• Second, Much greater accountability and
  transparency of government.
• Greater accountability between state and Urban
  local bodies
• Better budgeting, including accounting for
  guarantees.

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What can be done

• Third, recognize the uniqueness of the situation
  the world has never seen so many vary large
  conglomerations of very poor people in such big
  cities.
• Dealing with this situation will require public
  resources, extensive administrative capacity, and
  time.