New Delhi: The Modi government has planned to introduce a mechanism to assess the economic capacity of cities as it prepares a large-scale investment to channel to develop as a “engine of development”, as proposed in the Union Budget 2025-26, Theprint has learned.
The Ministry of Housing and Urban Affairs (Mohua) has formed an inter-ministerial committee under the chairmanship of Economist and Niti Aayog member Arvind Virmani to finalize the functioning of the city’s Economic Products (CEP) or city-level gross domestic product. (GDP).
According to senior officials of the ministry, CEP will play an important role in ensuring better socio-economic and infrastructure plans and will help attract private investment. The government is looking at large -scale private investment in developing cities over the next few years.
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A senior ministry official said, “While the Center is investing in the development of infrastructure through various missions, private investment is required for the development of infrastructure in cities.”
“If data about city-level GDP, or CEP is available, it will help the private sector gauge the economic capacity of a city and invest accordingly,” the official said.
The move to develop a functioning to assess the CEP comes after weeks when the Modi government announced its ambitious plan to invest Rs 1 lakh crore in cities through ‘Urban Different Nidhi’. To avail the funds, cities will have to raise at least 50 percent of the project costs from the market through bank bonds and public-private partnership.
“The fund will fund up to 25 percent of the cost of bankable projects with a stipulation that at least 50 percent of the cost is funded by bonds, bank loans and public-private participation. An allocation of Rs 10,000 crore is proposed for 2025-26, “Union Finance Minister Nirmala Sitarman said while presenting the budget.
Officials of the Ministry of Urban Affairs said that there is currently a standard functioning to estimate the city-level GDP in India. The 26-Member of members- in which government officials, as well as academics and urban planning experts have been included, has been tasked to finalize the functioning to measure the CEP.
The committee consists of officials of ministries such as Finance, Statistics and Program Implementation, and Labor and Employment, besides the Reserve Bank of India (RBI), seven state governments and four municipal commissions, others.
This will define economic areas, identifying the parameters or indicators that can be used to estimate CEP and suggest possible data sources. “(Also this) will select the most suitable base year, deflatter etc. for the assessment of CEP in the Indian context,” an order from the Ministry of Housing and Urban Affairs (Mohua) said on 14 February.
National Institute of Member Public Finance and Policy (NIPFP) Dr. Pinki Chakraborty, Professor and Dean of South Asian University Dr. Former director of Arup Mitra, and Professor of Indian Statistical Institute, Dr. Deepayan is a member of the government committee. Debolina Kundu, Professor and Director of the National Institute of Urban Affairs (NIUA) has been appointed as Member Secretary of the Committee.
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A decade in making
According to the ministry’s 14 February order, the committee is expected to submit its report by February next year.
The requirement of a framework to assess city-level GDP has been under discussion for almost a decade. The construction and implementation of urban and regional development schemes notified by Mohua mentions the need for city-level GDP.
In 2019, the Ministry appointed a part of the Smart Cities Mission to assess the availability of data at the national, state and city levels and to estimate the city-level GDP.
Consultation papers on the city’s GDP measurement structure, available on the website of the Ministry, lists 15 categories such as education, real estate and economic activities to assess city-level GDP. “Better plan is possible if policy makers may estimate the economic size and relative requirements of cities. Similarly, cities can be benchmarking their earnings and investment requirements against their peers after understanding the size and economic structure of their cities.
“While the economic capacity of large metropolitan areas is known, the city GDP measurement practice can detect many other cities, whose investment sites are potentially unknown,” said this.
Economic Development Councils (CEDC)
In recent years, urban development experts are emphasizing for a better plan for city-level economic development.
A high-level committee was pushed to install on urban planning reforms established by the Center in 2022 City level economic development council (CEDC) To avail the economic capacity of cities.
It reiterated the need in its report, titled ‘Route for Amrit period: Imagine and realize a new future for Indian cities, ‘ Which was presented in November last year.
The report stated that CEDC’s role will be “to frame economic development strategies for the city with the aim of enhancing employment and skills and stimulating local economic growth.
“Cedcs should be installed in cities with a million and more population. It should not be a advisory council, but in decision making, the active participation of the business community and professionals among others should ensure, ”Committee Chairman Keshav Verma had told Theprint last November.
(Edited by Sugita Katyal)