India’s Megacities Auger in Big Growth

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A new study forecasts major growth in India’s megacities fuelled by a growing economy and many more urban jobs. If handled well, the opportunities to reduce poverty and boost living standards represent an historical opportunity as the country accelerates its urbanization.

At present – unlike China, where the population is evenly split between rural and urban – India remains a majority rural place. But growing manufacturing and investment are fuelling the growth in urban areas while the rural economy stagnates. In turn, people are migrating to the urban areas searching for opportunities and a better standard of living. Unfortunately, many find things are not so good in the country’s sprawling urban slum areas and its crowded and congested cities – a legacy of poor urban planning spanning decades. 

But the current growth trend is a sign the country can turn things around with the right policies. "It’s a sign of India moving on to a higher growth trajectory,” D.K. Joshi, chief economist at Crisil (www.crisil.com) – an Indian ratings company - told the Guardian newspaper. “Investment has picked up really fast and is at par with other economies when they started lifting on a substantial basis.”

A report by the McKinsey Global Institute (http://www.mckinsey.com/mgi/publications/india_urbanization/index.asp) estimates that by 2030, 590 million Indians will live in cities and 70 percent of India’s new jobs will be city-based. To accommodate this surge in population, the country needs US $1.2 trillion in new infrastructure – a substantial business opportunity. This includes 7,403 kilometres of railways and subways, needed to build an urban space the size of Chicago every year.

Some progress is starting to be made: New Delhi’s brand new and impressive metro subway system is the country’s most ambitious infrastructure initiative since independence. It is efficient and clean and a role model of what can be achieved.

The Indian economy's growth in the last quarter was 8.6 percent; in the financial year ending in March 2010, it was 7.2 percent.

Getting urban infrastructure right is critical for India's future growth. To date it has not handled rapid economic growth and expanding urban areas very well. The country also still remains mostly rural, and since it is a democracy, this means rural votes carry significant weight in government decision-making.

In the face of the enormous surge in the urban population brought on by rapid economic growth, the government has done little to plan for it or prepare.

Worryingly given this state of affairs, the McKinsey study predicts India is on the verge of the second greatest urban migration in the world’s history. The report believes the country’s urban population could shoot to double the size of the United States by 2030, almost 600 million people.

Just as the United Kingdom became home to the world’s biggest city by population (London) by the end of the 19th century as a result of rapid industrial urbanization, so India could have "68 cities with population of more than 1 million, 13 cities with more than 4 million people and 6 megacities with populations of 10 million or more," the report sais.

It projects the Indian economy will be five times its current size by 2030 and that it will be the urban centres that will provide this growth.

India also stands out among the giants of the South – like Brazil and China – for being so young: the median age for the Indian population is 25.3 years (in China it is 34.1 years).

By 2030 India will have 91 million middle class households, up from 22 million today.

India will need expertise from across the South to handle this urban growth well and ensure the country’s growing prosperity will last and boost living standards for many millions more.

LINKS:

1) India’s urban awakening: Building inclusive cities, sustaining economic growth: download the report from McKinsey’s website. Website: http://www.mckinsey.com/mgi/publications/india_urbanization/index.asp

2) The future of cities special feature by the Financial Times. Website: http://www.ft.com/cities