Chennai has welcomed globalisation and liberalisation with open arms. As India’s largest auto hub with multiple automobile manufacturers setting up shop in the outskirts of the city, and being home to many IT services companies employing more than a lakh people, Chennai, with its concentration of skills and activities, is today an important centre for both manufacturing and services. Which in turn is facilitated by other ancillary services such as transportation and communication.

In a modern economy such as this, changes take place rapidly or over a period of time. Infrastructure for example, is perhaps the most tangible manifestation of change from within; new transport networks make it easier and faster for people to travel and create economic change and activity. In Chennai, for instance,the Metro has drastically cut travel times for those who work in the IT sector.

Integrating multiple smart city components

Movement of goods, services and labour across points within a city and to and from cities are the drivers of economic growth. But growth and development aren’t limited to tangible effects such as new infrastructure projects (roads, bridges, airports); it also includes better services for citizens. It is a smart combination of these two that ensures how citizens live and thrive in a city.

Tamil Nadu is the sixth most populous state in the country. According to the National Investment Promotion & Facilitation Agency (NIPFA), 68% of the state’s population is in the working age group. With most of this concentrated in Chennai, it validates the central premise of smart cities as being the centres and drivers of economic growth and development.

The challenges that cities face today as urban centres become more crowded is maintaining a steady rate of growth. This means ensuring that services are up to the mark and can keep up with demand.  As this column from Smart Cities Dive puts it: 

“In economic terms, the difference between outputs and outcomes is subtle but important, creating a dividing line between the end result of a project and the real change it creates in people’s lives”.  

Meeting the needs of a large population

According to the Ministry of Statistics and Programme Implementation, Tamil Nadu, with a Gross State Domestic Product (GSDP) of $226.8 billion (2017), ranks second in the country (behind Maharashtra) contributing 8.5% share of the GDP. The state needs to ensure that future growth keeps unemployment and poverty levels low while increasing the income of those who work.

Cities in general are home to a larger number of the working-age population. According to the 2011 census, 31% of India was urbanised; and according to a 2018 United Nations World Urbanisation Prospects Report, 34% of India’s population now live in urban areas. As this column in the Economic Times points out, urban centres also bear a heavy load when it comes to catering to the needs of a large and growing population:

“Growing urbanisation brings with it severe stress on the city infrastructure, basic services, housing, land use and environment. As more and more migrate to urban areas with aspirations of a better quality of life and opportunities, it becomes increasingly challenging to meet those demands”.

No doubt, cities and urban centres are best positioned to cater to vast economic and non- economic needs of its surrounding areas/districts. But rapid unchecked urbanisation, has its share of drawbacks. The floods that ravaged Chennai in 2015 were a result of marshlands and wetlands disappearing due to unscrupulous land use for infrastructure projects.  The recent water shortage in the city too was due to mismanaged urbanisation..

Constraints to smart city investments 

Infrastructure forms the basis for growth. Take, for example, the controversial Chennai-Salem expressway project that’s estimated to cost Rs. 10,000 crore. Though it is not a part of the smart city mission, ambitious projects such as these contribute towards the overall development of a city and its surrounding districts. The National Highways Authority of India (NHAI) has designated this project to be of national importance.

However, this particular project is also an example of the challenges that local, state and the union government face when it comes to weighing economic input with output and the non-financial costs of such an undertaking. Farm land would be needed and large areas of forests would be destroyed to make way for the project.

Space is, in fact, the biggest hurdle in sanctioning large-scale projects; land holdings by governments, which are more often than not distributed across multiple departments and agencies, are not easy to leverage as asset. Take China as an example, as outlined by Arindam Guha, writing on financing smart cities:

“This has been one of the major differences viz. a viz. China, where all urban land is owned by the local/city Government. Consequently, land monetization was one of the main sources of financing for Chinese cities during the Special Economic Zone (SEZ) development phase of the eighties”.

Then there is the question of funds. A vast majority of infrastructure projects are funded by and through central and respective state governments. These are large projects and often need long term investments to implement, maintain and upgrade going forward. 

Urban Researcher Aravind Unni, in a column for The Centre for Financial Accountability (CFA), writes on the underutilisation of funds in the smart city mission – 

“Out of the 35 states/UTs, 26 states have utilised less than 20% of the funds released. Though the fund utilisation seems grim, around it is claimed that 33% of projects (perhaps smaller ones) are under implementation or completed”.

According to the Economic Survey of India – Volume II, the smart city mission projects are mainly funded through the central and state governments (45%) along with Public Private Partnerships (21%) and borrowings from groups such as the World Bank and the National Investment & Infrastructure Fund (NIIF). 

However, recently, the smart city missions have come under scrutiny for not having sufficient funds. The Smart City Council of India (SSCI) stated that many of the cities they surveyed do not generate enough revenue to finance smart city projects.

Thus, various factors are at play when it comes to the ways on which urbanisation in general, and smart cities in particular, help a city grow economically and sustainably. While not all cities are the same in terms of geography or socio-economic make up, they are fundamentally a concentration of people, technology and infrastructure. Chennai faces some of the same challenges that other cities face—attracting businesses, spearheading job creation, etc. As it seeks to address these, it must remember that economic growth should be sustainable; otherwise results can be disastrous.