India`s cities grow fast, develop slowly

It happens every year. When monsoon rains lash Mumbai, the city turns into a cesspool, which along with its potholed roads and gridlocked traffic, mocks its ambition of becoming a global financial centre.

India has Asia's third-largest economy and the increasing global clout that goes with it. It is already home to a quarter of the world's 20 most densely populated cities.

One of them is Mumbai, where some 18 million people crowd into slums and skyscrapers, stretching the city's amenities and making it less attractive for investors.

While rapidly modernising cities such as Shanghai and Sao Paulo are winning business from centres such as London and New York, the slow pace of urban development in India is harming its cities, which by 2030 will be home to about 590 million people -- nearly twice the population of the United States today.

Indian cities over the next two decades will also house 40% of the country's population and generate some 70% of new job opportunities, McKinsey Global Institute (MGI), the research arm of consultancy McKinsey, estimates in a report.

To cater to this growth, India needs to invest USD 1.2 trillion in capital expenditure, mainly infrastructure, over that period, an eight-fold increase of current spending levels, MGI said.

"Across all major quality-of-life indicators, India's cities fall well short of delivering even a basic standard of living for their residents," the report said.

India now spends USD 17 per capita on urban infrastructure, compared to rival China's USD 116.

That figure is clearly inadequate: while it took about 40 years for India's urban population to rise by nearly 230 million in 2008, it will take only half that time to add the next 250 million people, analysts say.

India will, over the next two decades, see an urban transformation the scale and speed of which has not happened anywhere except China, with many cities becoming larger than many countries, in terms of population size and GDP.

"It's going to be one of the most defining changes that we have yet to see," said Roopa Purushothaman at Everstone Investment Advisors.

Poor infrastructure shaves an estimated 2 percentage points off India's economic growth.

"There cannot be high economic growth without a high degree of urbanisation," said Ashish Sharma, a principal at consultancy Booz & Co. "There is a clear, positive correlation between the GDP of a country and its degree of urbanisation."