After all the expectation, it is finally over. The Finance Minister and his team presented a well-thought out budget. However, there is a deeper context to the budget speech, one that the Minister himself does not control. And this colours the entire process: after all, however good a painting is, it matters little if the canvas itself is somewhat cracked.

From the perspective of spending on urban development, there are two sources: the first is part of the Central Plan, in the budgets of the two ministries, Urban Development (MoUD) and Employment and Poverty Alleviation (UEPA). Highlights of these expenditures: (1 crore = 10 millions)

  • Delhi Metro: Rs 507 crores
  • Integrated Development of Small and Medium Towns: Rs100 crores
  • Mega City Scheme: Rs150 crores
  • Other Urban Development Schemes: Rs 732 crores
    (This item includes viability gap funding for the now-famous Special Purpose Vehicle being proposed for infrastructure projects)
  • Poverty alleviation schemes for two schemes: Rs 400 crores

These Central Plan figures total about Rs 1,900 crores.

The second source of urban funds is the National Urban Renewal Mission, also an announcement that has received much media attention. Funding for this Mission shows up as part of Central Assistance for state plans, and is composed of:

1. Urban Renewal sub-mission for slum development: Rs 1989.62 crores
2. Urban Renewal sub-mission for urban infrastructure: Rs 3477.55 crores

While the total plan for this mission is Rs 5,467 crores, central grants would only be Rs 1650 crores, with the remaining to be raised as debt by the states themselves.

Therefore, total plan funding for urban areas is Rs 3,500 crores. When measured against a total Plan budget of Rs 145,000 crores, this works out to just over 2%. At an urban population of over 30 crores, the overall per capita urban plan expenditure works out to around Rs 100. For the urban poor as well, this figure is approximately the same, given that Rs 1,000 crores are being spent on about 10 crore poor.

Compare this to plan expenditure on the rural poor. A few highlights:

  • National Food for Work programme: Rs 5400 crores
  • Rural employment Programmes: Rs 4462 crores
  • Other Rural Development programmes: Rs 1992 crores
  • Rural housing programme (IAY): Rs 2500 crores
  • Rural drinking water and sanitation program: Rs 4275 crores
  • Agriculture and allied: Rs 6425 crores
  • Education programme (SSA): Rs 7150 crores
  • Mid-day-meal programme: Rs 3000 crores
  • Rural health mission: Rs 6600 crores
  • Women and child development: Rs 3142 crores

The total spend on these programmes alone comes to Rs 45,000 crores. There are others, not including non-plan expenditures that also have a rural bias, like the Rs 26,000 crore food subsidy.

The total rural population in India is 75 crores, hence this works out to a spend of Rs 600/capita, six times the amount being spent for the urban citizen. To estimate the spend specifically on the rural poor, let us remove programmes like the roads programme, and assume a conservative estimate of 50% of the total rural population as poor. The figure still works out to Rs1000/capita, ten times the figure for the urban poor.

All union budgets assume that urban areas are cash cows, ready to be milked. If we don’t start investing in urban areas, the milk supply could soon stop.
 •  Lessons in urbanisation
 •  Credible low-income housing
The statistics tell a stark story. There is no doubt that there is poverty in rural India, and that we need a rising tide to lift all boats. However, we need to restore some rigour into policy discourse. Unfortunately, it is difficult to have this discourse in the current climate that colours rural-urban issues. There are thousands of rich farmers in the rural hinterland who are not tapped for any contribution to the national exchequer, while millions of urban poor lie forgotten in the penumbra of the spotlight on their rural cousins.

We can no longer subscribe to the empty rhetoric of "rural masses and urban elite", a phrase that has become a powerful myth. It banishes urban issues to policy pariahdom, and dares the foolhardy politician to present an urban face. Politically, the urban voice is under-represented: our political jurisdictions do not accurately reflect the increased proportion of urban voters; delimitation exercises are urgently required in every state. For example, Karnataka is 33% urban, yet less than half this proportion are urban MLAs. Besides the inequity of this situation, there is also fiscal danger: urban India is the sacred cow feeding the national coffers, but is itself is facing severe challenges.

Urban areas contribute 62% of the country’s GDP, and almost the entire direct and indirect tax base of over Rs 350,000 crores. Urban Indians constitute 28% of the country’s population, and this figure will grow to 50% in the next twenty five years. The urban poor often live in sub-human conditions, and their numbers are growing. Urban infrastructure is barely able to cope with the challenges being placed on it. More than Rs 300,000 crores of investment is needed over the next decade, in water and sanitation systems, solid waste management facilities and low-income housing.

The Boston Consulting Group has a matrix to depict firms at different stages of their evolution. Mature businesses are called "cash cows", meaning that they can be milked with no investments. All union budgets assume that urban areas are cash cows, ready to be milked. The danger is that if we don’t start investing in urban areas, the milk supply could soon stop.

It is time for a national debate on a new direction in public policy, one that acknowledges this deep asymmetry in public investments between rural and urban areas. There will undoubtedly be passionate voices on both sides of the aisle; the discourse will only be that much richer. Out of this can hopefully emerge a better canvas for the Finance Minister to paint his subsequent budget speeches.