Union Budget 2021-22 & the Roadmap towards Building Inclusive Cities

Soumyadip Chattopadhyay, Arjun Kumar

The Union Budget of India 2021-22 came with the baggage of managing the expectations of the Indian population as the COVID-19 pandemic and the pandemic-induced lockdowns led to large-scale sufferings. Urban areas in India were already reeling with problems of planning, governance and infrastructural development and allocation for urban development has continued to accelerate. Budget 2021- 22 reiterated that the cities are the drivers of economic development. And hence, to aid this process, there has been a 9% rise in Budget Estimate (BE) for urban development, from Rs 50,040 crores in FY 2020-21 to Rs 54,581 crore in FY 2021–22.

The pandemic could have served as an opportunity for the government to adopt corrective measures amid all the structural and infrastructural gaping realties in Indian cities. As was imminent, the reduction in the Revised Estimate (RE) for the financial year (FY) 2020-21 to Rs 46,791 crore was due to the pandemic. The actual estimate (AE) for FY 2019-20 stood at Rs 42,054 crores. Infrastructural development through capital expenditure has been on the rise, the effect of the pandemic has resulted in a 22% increase in budgetary allocation.

One of the key challenges that the cities continues to grapple with is to meet the growing demands for water supply and sanitation. The increased budgetary allocation to Swachh Bharat Mission (SBM 2.0), Jal Jeevan Mission (Urban) (JJM-U) and controlling air pollution in 42 big cities having more than one million population is a promising step. The JJM-U, with a budgetary provision of Rs 2,87,000 crore for five years, plans to provide 2.87 crore tap-water connections in 4,378 statutory towns and liquid waste management in 500 Atal Mission for Rejuvenation and Urban Transformation (AMRUT) cities.

The government continues to tackle the issue of water shortage by means of infrastructural development and ignores the challenge of water wastage. Cities waste 35 to 60% of water meant for consumption due to a lackadaisical attitude by the citizens, fragmented policymaking and poor governance.

JJM-U and SBM 2.0 seeks a comprehensive solution to these challenges through water management policy to make equitable and sustainable water supply a reality. Along with this, SBM 2.0 responds to challenges of waste collection, management and treatment. The increased budgetary allocation appears to proactively pursue the JJM-U and SBM 2.0 with a renewed vigour, which could emulate the idea of ‘clean and healthy’ India.

This year’s budget also responds to the infrastructural demands for transportation in metro cities in the form of investment in public transportation manifesting in buses and metro rail projects. The total BE outlay under the MRTS and Metro Projects head for the FY 2021-22 stood at Rs 23,500 crore, of which Rs 23,282 crore was on the capital expenditure; there was 17.5% rise in BE outlay for FY 2021-22 as compared to FY 2020-21. This outlay increased transport outlay for peripheral areas of Tier-1 cities, which aims to make city limits accessible for the labour force living in these areas.

These changes are envisaged through a push for Public-Private Partnership (PPP) model. So far this has had a mixed experience, wherein the private sector invests only 20% of the total funds required. The absence of a revenue model makes the urban infrastructure sector financially unviable, further dampening the private sector.

Lack of enabling PPP legislation, a multiplicity of agencies, lack of ability to select and structure a PPP project, lack of political will towards project implementation and lack of citizen participation further complicate the entire process of formulation and implementation of PPPs. The answer still remains that there needs to be a comprehensive PPP model with a defined role and governance. This can expand into an independent regulatory mechanism, which can facilitate accurate assessment as well as monitor cost of service delivery leveraging smart technology and use of a cross-subsidy model of differential user charges across different user groups to ensure cost recovery at an overall level.

Smart Cities Mission (SCM) has not had great results even after the completion of five years. The SCM envisaged tall goals to attract investment, driving economic growth, improving the quality of life for people and thereby setting a virtuous circle of growth and development. The BE for SCM remains the same between the FY 2020-21 and 2021-22 at Rs 6,450 crore. Similar was the situation of AMRUT, whose BE remained the same between the FY 2020-21 and 2021-22 at Rs 7,300 crore (RE for FY 2020-21 was Rs 6,450 crore). The operationalisation of these schemes, especially SCM, remains worrisome even though the planning is decentralised and happens at the city-level.

SCM allocation is based on strict criteria for selecting cities that are driven through competitive advantage. This led to a rush towards larger and costlier infrastructure development which would result in large capital investment and increase the competitiveness of the proposal. This investment-driven logic aims to build the financial corpus of these cities. Though these issues are attempted to be resolved by the budget with the launch of national digital initiatives, these would not be enough to rethink the model of growth entirely.

Access to affordable urban housing remains a key concern for the ideal of universal housing. The reality remains that the economically weaker sections of the population are absent from the housing market. The informal nature of employment and lack of access to credit does not ease the conditions.

The imagery of migrant workers walking back to their home towns covering large distances on foot, during the lockdown, has reignited the demand for welfare schemes that cater to the needs of housing the population of the city. There has been a major spurt in housing expenditure during FY 2020-21 to sanction the targeted 11 million houses as per demand survey, of which almost all has been sanctioned. Hence, there is no increase in the budgetary allocation to the government’s flagship housing scheme Pradhan Mantri Aawas Yojana – Urban (PMAY-U).

Budget 2021-22 has provided some indirect benefits for the urban housing sector that do not respond to the structural problems but is a step in the right direction. An additional deduction of interest amounting to Rs 1.5 lakhs for purchasing an affordable house and tax breaks for the developers of notified affordable housing projects and rental housing projects for one more year up to 31st March 2022 have been provided to increase the supply of affordable housing. Specific separate allocations to improve and ensure access to housing to migrant workers could have been more fruitful in tackling the housing shortages.

To comprehensively respond towards demands for social welfare and urban development, the gaping structural and management concerns have to be catered to. India could learn from the international best practices, keeping variables like population and resources into consideration. The answers to these concerns can be located through decentralisation, proper management, technology and capacity development. Governance in the cities has to be reimagined.

On a positive note, the XV-FC, along with increasing the overall outlay for the urban local bodies to Rs 1.21 lakh crore over the five years compared to Rs 87,000 crore during the XIV-FC period, has made the receipt of the grant conditional upon publication of audited annual accounts and notification of floor rates for property tax. These are expected to usher in the much-needed financial discipline among the urban local bodies and make them self-reliant. The budget has responded to the challenges of COVID-19 but whether this response is comprehensive and enough can only be seen through an understanding of micro-governance of the allocations.

About the Author

Soumyadip Chattopadhyay
Dr Soumyadip Chattopadhyay is Associate Professor of Economics, Visva Bharti University, Santi Niketan and Senior Fellow at IMPRI Impact and Policy Research Institute, New Delhi

Dr Arjun Kumar pic IMPRI
Dr Arjun Kumar (arjun@impriindia.org) is Director, IMPRI and China India Visiting Scholars (CIVS) Fellow at Ashoka University & Asian Century Foundation


  • Ritika Gupta

    Ritika Gupta is a senior research assistant at Impact and Policy Research Institute. Her research Interests include Gender Studies, Public Policy and Development, Climate Change and Sustainable Development.

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