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India's Environmental Challenge: How Will They Climb the Approaching Cliff?

Words by 3p Contributor
Leadership & Transparency
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By Anum Yoon

It’s hardly a secret that India has been expanding in just about every way over the last 20 years or so. Its population, its infrastructure and its degree of technological advancement have all been approaching a line that more and more resembles a cliff than a steep hill.

The number of people living just in Indian cities is expected to grow from 377 million all the way to 590 million in the next 15 years. To match this growth, India will need to build millions of square miles of residential and commercial space. Shockingly, this roughly translates to constructing a brand new city of Chicago from scratch every year just so there will be enough places for people to live and work.

Smart Cities Initiative


Usually we only think of cliffs as dangerous to fall from, but India’s Prime Minister Narendra Modi has shown he knows they can be just as dangerous to climb. To keep with his country’s incredible projected growth, in April Modi launched several projects under the banner of a program known as the Smart Cities Initiative, or SCI. The goal of the SCI is to make sure all of those new Chicagos don’t become squalid tent-cities or rows and rows of tenement housing.

That means when people migrate and buildings start going up, it’s vital to make sure that those buildings are adequately inhabitable, and that they are built with the proper roads and transportation to connect them. To do so, it’s estimated the SCI will facilitate the construction of 2.5 billion square meters of roads and an incredible 7,400 kilometers of public railroads. To put those numbers in perspective, that’s more than 20 times the area of roads and rails constructed in India for the last seven years.

The environmental challenge


While just building all of that would be difficult on its own, complicating the matter is that, as you may imagine, such a high volume of construction creates a potentially huge climate problem. The United States had the luxury of living through its greatest period of growth in ignorance, but India will have no such excuse and will be forced to confront the effects of its massive-scale construction head-on. It will be wise to do so: The effects of India’s manmade pollution is apparent today, even before it builds 20 new Chicagos. Experts already see a negative effect on rainfall, air and water quality – all of which pose a serious threat to the efficacy of India’s agricultural sector.

SCI is planning cities with a focus on sustainability in order to dampen this potential impact. One of the primary ways the program seeks to accomplish this goal is by planning highly concentrated cities. Instead of the sprawling urban centers almost completely dependent on car ownership that we’ve come to know and loathe here in the United States, India is planning to construct dense cities that can be successfully navigated with public transportation. An added bonus of this type of urban planning is that the monetary and energy cost of municipal services will be cut by as much as 30 to 40 percent.

Who will live in these cities?


The question of who exactly will live in these cities may be just as important as how these cities will be built in order to guarantee their long-term success. The short answer is young people: 270 million people of working age are expected to be added to India’s population in the next 15 years. The next question, perhaps one even more critically important, is: What jobs will all of these working-age people have?

As important as agriculture is, that sector will not have enough work for all of those expected to be on the job hunt. Even if it did, growth in that sector would not amount to the kind of explosive economic growth all of those new cities will desperately need. For that to happen, there will need to be openings in the service and industrial sectors, which created 83 percent of the country’s gross domestic product three years ago.

Of course, jobs in this sector will primarily be found in urban areas, which will mean great things for the quality of life in those new metropolises. Recognizing that fact has led SCI to invest in things besides just roads and rails, like employment opportunities, for instance.

How will India pay for these cities?


SCI is expected to run India a cool $1.2 trillion – just in capital expenditure – through the next 15 years. The Indian government has plans to pick up this tab through conventional means like state tariffs, but also through slightly different methods like generation of energy incentives and something called Viability Gap Financing, or VGF. VGF is basically a government grant for programs that need an initial boost of capital to become financially viable.

VGF has already been used to kickstart sustainability programs in India like the National Solar Mission. However, the use of VGF in the solar industry may have also demonstrated some of its shortcomings. Since companies bid for the VGF grant and the lowest bid wins, solar companies have complained that the bids have dropped the grant to a number that doesn’t make their business viable. This essentially defeats the purpose of having VGF in the first place. This means lots of industries critical to India’s growth that will need some initial financing may not get the level financing they need.

Other concerns


SCI’s ability to finance this growth is far from its only issue. Though it plans to build cities with a healthy density, it also has policies like the Floor Space Index – which restricts land use – that actually limit the number of people who can live in a given area and encourages sprawl. The effects of policies like the Floor Space Index can be seen in the fact that the populations surrounding the existing cities of India are already high and are growing.

If SCI does not properly finance public transport, this sprawl could result in massive traffic problems that would have a very negative effect on economic growth. Families in India’s third biggest city, Bangalore, lose as much as 2 to 4 percent of their income because of the cost of commuting. Also, the costs of shipping to these sprawling areas on cities’ peripheries is five times what it would be in the United States in a comparable area.

How these problems can be solved


Because SCI regulations and policies like VGF and the Floor Space Index may well prove to be counterproductive, India can only make its growth sustainable if it reforms its regulatory structure and builds better relationships with potential international financing partners. This could be done by building trust in India’s own banking network by encouraging disciplined investment and, above all else, transparency.

With the right funds and structure in place, Prime Minister Modi may be able to create the dense, well-connected, economically-advanced and environmentally-safe cities he so desperately wants. In other words, India can climb that approaching cliff without falling off.

Image credit: Narendra Modi via photopin

Anum Yoon is a writer who is passionate about personal finance and sustainability. She often looks for ways she can incorporate money management with environmental awareness. You can read her updates on Current on Currency.

3p Contributor

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