Urban Infrastructure Financing in India: Challenges and Solutions

• India’s urban population is expected to rise from 400 million to 800 million in the next three decades.

• A World Bank report estimates India will require about ₹70 lakh crore by 2036 to meet its urban infrastructure needs.

• Current government investment in urban infrastructure is around ₹1.3 lakh crore annually, less than the required ₹4.6 lakh crore per year.

• Municipal finances, a crucial component of urban infrastructure funding, have remained stagnant for decades.

• Collection inefficiencies exist in urban local bodies (ULBs), with ULBs in Bengaluru and Jaipur collecting only 5%-20% of their potential tax revenue.

• Cost recovery for services ranges from 20% to 50%, highlighting the significant gap between the costs of urban services and the revenues generated from them.

• Indian cities struggle with low absorptive capacity, with about 23% of total municipal revenue remaining unspent.

• PPP investments in urban infrastructure peaked at ₹8,353 crore in 2012 but plummeted to just ₹467 crore by 2018.

• The viability of PPP projects often depends on the availability of payments or viability funding.

• Long-term structural reforms, including strengthening State finance commissions and empowering municipal governments.

• Medium-term measures can transform the development of sustainable urban infrastructure.