8/20/2020

Planning and Economics of Cities

B.Plan | VII Semester | Autumn Semester | 2020-2021
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Ms. Arshi Parashar | Department of Architecture | Maulana Azad National Institute of Technology
Urbanization as opportunity
o Dense, diverse, networked and
dynamic cities will shape India’s
form and future.
o The country must integrate the
planning and economics of cities
to harness urbanization as a
national resource.

Dense Diverse
India’s
resource
Networked Dynamic

India’s Population Sprawl India’s Rural Challenge

o With about 860 million residing in villages in 2014, projected to reduce only marginally to 810
o India’s urban population, estimated at 410 million in 2014, 135 million million by 2050, India will urbanize in the presence of huge problems of development in rural
in 2020, is projected to reach 814 million by 2050. areas.
o Providing land, housing, workplace, infrastructure and services to the large numbers in cities
o The country will have three times as much population in cities and
and towns, existing and to be added, is a daunting task for policymakers and planners in
towns in the next 75 years. India.
o In particular, affordable housing, transport and basic amenities to the urban poor, including
After 30 years slum-dwellers, accounting for more than a quarter of urban residents, pose major challenges.
1,352 million 1,639 million
2020 2050

After 75 years
After 36 years
860 million 810 million
2014 2050

Ms. Arshi Parashar | Department of Architecture | Maulana

Azad National Institute of Technology 1
 8/20/2020

Significance of Cities Global Rural Urban Mapping

o Cities and towns in India, containing about 3 per cent
of the country’s geographical area, contributed 62–63
per cent of GDP in 2007.
o This contribution is projected to rise to 75 per cent by
2021 Cities will create 70 per cent of all new jobs over
the next two decades.
o They will generate 80–85 per cent of tax revenues of
governments.
o However, the country will need `9.74 million crores for
investment in affordable housing and infrastructure
over a period of 20 years to sustain the contribution of
cities.
o Cities cannot discharge their fundamental role as
drivers of economic and social transformation, unless
they are firmly in position to meet the ‘backlog’,
‘current’ and ‘growth’ needs of firms and households
for land, floor space and public services.
https://sedac.ciesin.columbia.edu/downloads/maps/grump-v1/grump-v1-urban-extents/indextents.jpg

Smart Indian Cities Economy

o The Smart Cities Mission in India aims at robust models
of urban development based on smart plans, projects,
processes and solutions.
o The Government of India (GoI) will invest `100 crores
annually in each of the 100 smart cities for five years;
states and urban local bodies (ULBs) will mobilize an
equivalent amount or more.
o These sums are expected to catalyze further funding
from internal and external sources of cities to
implement ‘area-based’ (city improvement or
retrofitting, city renewal or redevelopment and city
extension or green field development) and ‘pan-city’
programmes (projects having citywide implications).
o They must be accompanied by hard-core reforms in
the systems of urban planning, financing and
governance.
o These reforms call for understanding the economics of
cities and the reasons why economic activities continue
to localize in spite of globalization and revolution in
information and communication technology (ICT).
o Contrary to the belief that a globalizing and electronically networked world is decreasing the role of
geography, the spatial concentration of economic activity in city regions continues to be overwhelming—
in both developed and developing countries.
o Urban areas contribute more than 80 per cent of the GDP in South Asia and worldwide.
o The top 750 cities of the world contribute 57 per cent of the global GDP, and their share would rise to 61
per cent by 2030.
o The largest 123 metropolitan areas account for 8 per cent of global population, but more than one-third
of economic output.
o The trends in localization of growth suggest that new technology is strengthening the forces of
agglomeration in cities rather than weakening them. It is enhancing the returns to face-to-face contact
and collaboration.
o This is particularly so in developing countries like India where cities are the centres of human capital
accumulation, nurseries of new ideas, hubs of innovation and platforms for application of new
technology. The economic significance of cities derives from their agglomeration and network externalities.
GDP
57% Top 750 Cities
61%
2014 2030

Ms. Arshi Parashar | Department of Architecture | Maulana

Azad National Institute of Technology 2

Agglomeration of Economics
o Agglomeration economies, occurring on the supply side, arise from the clustering of firms,
households and institutions in cities.
o They manifest in the benefits of higher productivity and lower transaction costs.
o They reduce the costs of moving goods, people, information, ideas and knowledge.
o Network economies are linked to the use, integration and merger of networks, including
transportation, communication and knowledge.
o Agglomeration and network externalities lead to economies of learning, sharing and matching.
o Small market towns generate scale economies in marketing and distribution of agricultural inputs
and outputs.
o Medium-sized cities catalyze localization economies of manufacturing and specialization, acting as
technological enclaves.
o Large cities offer urbanization economies associated with market size, diversity and innovation.
o Metropolitan city regions combine the benefits of specialization, diversity, competition and
networking. They attract a large variety of skilled activities and act as breeding grounds of new ideas,
practices and products.
o Urban land, with its horizontal and vertical dimensions, lies at the core of agglomeration;
transportation is the key to networking.
Externalities of Economies
POSITIVES
o Cities propel growth as an economy specializes in secondary and tertiary production. For these activities, not
only scale but also location matters.
o The externalities of cities create multipliers for growth through direct, indirect and induced effects.
o They enable firms to benefit at a stage of development when the scarcity of physical and human capital
favours the spatial concentration of economic growth.
o They also facilitate the mobilization of public finance for development by taxing ‘agglomeration rents’.
NEGATIVES
o When the concentration of economic activities in a node or carrying capacity of a network exceeds a
threshold, congestion externalities creep in.
o Diseconomies of agglomeration manifest in overcrowding, sprawl, deterioration in public services, wastage of
resources, traffic congestion, pollution, slums, poverty, crime, social unrest, vulnerability to disasters, etc.
o Density also leads to public health hazards, including spread of communicable diseases.
o Globally, cities account for 75 per cent of the consumption of natural resources, 80 per cent of energy supply
and 75 per cent of carbon emissions
Ms. Arshi Parashar | Department of Architecture | Maulana
Azad National Institute of Technology
8/20/2020
Urban Land
o Urban land occupies a central place in the socio-economic transformation of a developing country.
o It is a resource to finance urban development.
o Serviced land is essential to address the needs of an ever-expanding urban population.
o It provides a platform for economic growth to occur. It is instrumental in avoiding the unplanned
expansion of cities.
o It is the key to inclusive urbanization and addressing the needs of the urban poor, including slum-
dwellers.
o Transport plays a pivotal role in servicing land, unifying labour markets and matching jobs and skills.
o It extends product markets, increases competition, expands labour market choices, balances employment
and housing, enables the formation of economic agglomerations and enhances the tax bases of
governments.
o Transportation grids and land use densities define the morphology of a city.
o Transportation and land use integration has been the principal instrument adopted by developed
countries during their urban transition to enhance the positive effects of urbanization and mitigate its
negative consequences.
o However, Indian cities have not been able to exploit the benefits of such integration due to their
fragmented approach to land use and transportation planning.
Unplanned Development
o Cities in India face constraints of serviced land and floor space due to ill-functioning land and housing
markets, faulty model of urban planning to address market failure and irrational restrictions on land use and
floor space index (FSI) or floor area ratio (FAR).
o The problems are compounded by increasing demand for land, fuelled by localization of growth and lack of
investment in infrastructure, especially transportation.
o Exorbitant pressure on urban land prices is making housing unaffordable to not only the poor and low-
income segments but also the middle-income group (MIG).
o Excessive pressure on congested central locations is resulting in haphazard development.
o Unwarranted expansion of cities is leading to suboptimal land use, resulting in wasteful commuting, traffic
congestion and severe strains on civic services.
o If unchecked, these trends will lead to serious environmental consequences for both urban and rural areas.
o They will result in unsustainable use of land, air, water and energy resources.
o Production of food grains will also suffer due to indiscriminate conversion of fertile agricultural land to urban
use.
o A major negative social impact of unplanned urban development is segregation of the poor from the
rich. This breeds social unrest and crime.
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Urban Problems Master Planning Flaws

o Many of the observed urban problems in India are rooted in the present models of urban planning, land
management and infrastructure financing.
o Indian cities are under-planned, under-funded, under-managed and over-regulated. They lack plans to
guide economic development.
o They are obsessed with physical control of land markets rather than enabling them to work for inclusive
growth and sustainable development.
o They are plagued by the outdated ‘master planning’ model, which treats transportation as a ‘residual’ rather
than a ‘leading’ force.
o Cities also suffer from gross under-investment in transportation infrastructure due to the failure of urban
planning to present a coherent strategy of plan financing.
o Master planning has resulted in an utter scarcity of serviced land and floor space for value-creating activities,
including affordable housing.
Master planning, as practised in India, has three major flaws.
1. First, it aims at artificially confining the city to a predetermined, rigid and utopian built form. It pays scant attention to what the
great urbanist Jane Jacobs calls the ‘organized complexity’ of cities, making them inherently dynamic. Master plans adopt a physical
view of the city, disregarding its economic fundamentals. They fail to integrate the economics of land, transport and cities with
spatial planning. They neglect the determinants of ‘location’, including scale economies, transport costs, agglomeration
externalities and factors such as market access, backward and forward linkages, costs, prices, rents, amenities, technology access
and learning opportunities.
2. Second, while the majority in Indian cities belongs to the poor and low-income groups (LIGs), master plans, with dictatorial
connotations, rely on the space norms of the average middle-class household in the city. These plans are not in sync with the
population composition and income distribution structure in urban areas. As a result, they have squeezed the urban poor out of
formal land markets. The informal economies of cities which engage the bulk of their residents do not find a place in the formal
urban plans. Master plans have ‘mastered’ over the poor. While the essence of cities is about people living, working and learning
together to benefit from collocation, master plans are neither people-centric, nor people-driven.
3. Third, master planning, by neglecting the externalities of cities that capitalize into tax bases of governments, fails to incorporate the
principles of benefit taxation, congestion charging (CC) and value capture financing (VCF) into the strategy of planned urban
development

Under- Under- Under- Over- Rigid Ignores Neglects

planned funded managed regulated Form LIG externalities

Transportation Bogota, Columbia

o Transportation is the backbone of a city.
o It connects households to opportunities, and firms to prosperity.
o Along with land use, it shapes city form and functions.
o Transport infrastructure, including arterial and radial roads, public transit system and commuter rail networks,
influences economic growth by facilitating external economies and investment multipliers.
o However, it is expensive. In particular, mass rapid transit (MRT) and high-speed rail (HSR) are very
costly. Paradoxically, the ambitious master plans in India have neglected the planning and financing of public
transport (PT) for long.
o The land use planner’s vision, the transportation planner’s strategy and the urban economist’s perspective are
not integrated.
o This is conspicuous in India’s metropolitan city regions, which are the powerhouses of economic growth.
o These regions suffer from an utter lack of connectivity infrastructure, resulting in their inability to exploit the
benefits of accessibility, density and networking. They are facing premature suburbanization, much before
they could harness their agglomeration potential.

Ms. Arshi Parashar | Department of Architecture | Maulana

Azad National Institute of Technology 4
 8/20/2020

Bogota, Columbia Bogota, Columbia

Bogota, Columbia Central Park, New York

Ms. Arshi Parashar | Department of Architecture | Maulana

Azad National Institute of Technology 5
 8/20/2020

Learning from other cities Issues in Indian cities

o Great cities of the world are products of not only market forces but also policies and actions by governments
that magnified the beneficial effects of externalities while minimizing their negative consequences.
o The enduring contribution of these cities to the development of their nations can be traced to the
innovations adopted by governments at crucial stages of urban transition.
o For example, the 1667 Building Code of London after the Great Fire, the renovation of Paris from 1853 to
1870 by Baron Haussmann, the 1811 ‘Grid Plan’ of Manhattan, the 1916 Comprehensive Zoning Ordinance of
New York City and the Standard State Zoning Enabling Act issued by the United States Department of
Commerce in 1922 laid solid foundations for orderly development of cities spanning over a long period of
time.
o During the nineteenth century, the built-up area of Manhattan increased sevenfold along the 1811 Grid
Plan. This plan, along with major transportation investments, enabled New York City to rise to commanding
heights.
o Spatial planning and timely development of infrastructure were key instruments that shaped the structure
and functions of world’s great cities.
o In particular, transport–land use integration created a congenial environment for creative entrepreneurs and
skilled workers to engage in value-generating activities.
o It reduced the cost of connecting, interacting, networking, organizing, producing, transacting, transporting,
consuming, learning and innovating.
o India is at the forefront of the Urban Revolution sweeping across the developing world in the twenty-first
century.
o Our concern is the issue of land, transport and urban planning in India’s transition to a developed country. It is
concerned with policies and instruments to make serviced land and floor space available in tune with the
demands of inclusive growth and sustainable development.
o Urban planning and economics, with their implications for density, accessibility, scale, agglomeration and
networking economies, will be the key factors driving India’s socio-economic transformation.
o If enabled, cities will act as powerful drivers of economic growth and generators of public finance for
development. If neglected, they will lead to disastrous consequences for the environment, including climate
change.
o The largest metropolitan cities of India are already subjected to serious forms of environmental
degradation. Pollution in Delhi is reaching life-threatening levels, culminating in the ‘odd–even’
scheme. Bengaluru is no longer a ‘garden city’ as once called. Devastating floods of Hyderabad in August
2000, Chennai in November 2015, Bengaluru in July 2016 and Mumbai in July 2005 and August 2017
demonstrate how fragile Indian cities are.
o They reveal that not only regional and urban planning but also infrastructure systems have failed to keep pace
with urbanization.
o These issues are deeply rooted in the paradigm of master planning that neglects the key principles of land,
transport and urban economics.

Good Urban Economics Thank You

o Good urban economics is good urban planning and vice versa.
o If growth is India’s prime concern, ‘where’ growth occurs needs to be a key consideration for policymakers.
o Urban planners and economists must work together, combining physical planning and economic
instruments, to assist cities in discharging their fundamental role as engines of spatial and structural
transformation.
o The speed of economic development depends on how these two fundamental processes supplement and
reinforce each other.
o Unless efforts are made in time to augment agglomeration economies and mitigate congestion
diseconomies as cities evolve, the positive impacts of clustering and networking on economic growth will be
offset by their negative effects on environment and quality of life.

Ms. Arshi Parashar | Department of Architecture | Maulana

Azad National Institute of Technology 6