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THEME PAPER
India is urbanising rapidly. a substantial increase in address climate change.
By 2036, its towns and cities public investment—central Cities like Delhi, Bengaluru,
will be home to 600 million government spending has Chennai, and Hyderabad
people, or 40 percent of more than doubled from are particularly vulnerable,
the population, up from 31 FY21 to FY24—private facing threats like zero
percent in 2011, with urban capital remains largely groundwater levels and
areas contributing almost untapped. Institutional high risks of flooding. The
70 percent to GDP by 2036. investors, like insurance situation is exacerbated by
India will need to invest and pension funds, inadequate provision of basic
$840 billion in infrastructure allocate only 6% of their urban services, which has
- an average of $55 billion funds to infrastructure.The been compounded by climate
or 1.2 percent of GDP per long gestation periods and change impacts. Despite
annum. However, estimates high capital requirements these challenges, there are
suggest that between 2011 of infrastructure projects significant strides towards
and 2018, the country’s total deter traditional lenders, improving urban housing and
capital expenditure on urban exacerbating the financing infrastructure. Infrastructure
infrastructure averaged only gap. To achieve its development, especially in
0.6 percent of GDP, which is ambitious infrastructure transit systems like metro and
half of the required quantum goals, India needs greater rapid rail, are also notable,
of investment. Central private sector involvement. enhancing urban connectivity
and state governments Without it, the country’s and reducing emissions.
finance 72 percent of grand vision may fall short.
urban infrastructure, with 1.3 Environmental The relationship between
commercial financing Challenges and Rapid economic growth and
providing only 5 percent. Urbanisation environmental sustainability
Recognising these challenges, in India has been widely
the government has The expansion of urban areas explored, revealing a delicate
taken measures to enable
commercial financing, but
its use remains extremely
limited, even in financially
strong cities. To tap into
private capital, urban local
bodies (ULB) will need
to comprehensively build
their capacity and focus on
executing bankable projects.
It will also be important
for the country to develop
the municipal bond market
and introduce innovative
financing structures. contributes to increased balance between development
Financing Challenges greenhouse gas emissions and ecological preservation.
in Infrastructure and ecological footprint, Research indicates that India’s
Development: Despite complicating efforts to rapid economic expansion
20 HUDCO-HSMI Publication
