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FINANCING FOR SLUMS UPGRADATION IN URBAN INDIA

K.V.N.Sandhya*

Introduction:

During the last four decades, there has been fast urbanization in our country. Theurban population was 18 % of the total population in 1961, which increased to 28 %in 2001. The increase in urban population is mainly due to low employmentopportunities and lower wages in rural areas. Migration and fast growth of urbanpopulation witnessing numerous problems like over crowdedness increase in morenumber of slums, shortage of safe drinking water, overburdened public healthcenters, insufficient infrastructure and housing, poverty and non availability of finance in urban areas. Among the above stated problems, emerging of more andmore number of slums has become a challenging issue in urban areas, becauseabout 33% of urbanites live in slums. The proliferation of slums in major urbancenters has led to urban environment having ghettos of disease and povertycoexisting with oases of plenty. It is in this context in this paper we made anattempt to study the availability of finance for welfare schemes in urban India.

The main objective of the paper is to study the financial allocation for welfareschemes meant for urban development in urban areas in India.

Review of literature : -

N.R.Madhavi, in her article opined that Mumbai is a metropolis and recorded apopulation of 119.14 Lakhs in 2001. It is a nerve center of India and one of the

largest VAS in the world. The problems of the city stem from the excessive activitiesin a limited space. To decongest Mumbai, Navi Mumbai developed as an alternativeurban area as a new metro center opposite the old city. The pressure of NaviMumbai has reduced the growth rate of population of greater Mumbai. Thus NaviMumbai absorbs immigrants who would otherwise come to Mumbai as well as


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attract some of the Mumbais present population. The present article is related tosituation and casual analysis of migration and urbanization in Navi Mumbai.

*Research Scholar, Dept of Economics, Osmania University, Hyderabad

**Paper Presented at Two Day National Seminar on Urbanization in IndiaProblems & Prospects Held on 24-25 th Jan09 at OUCW, Koti, Hyd.

Major issue in urban planning stem from the excessive concentration of populationand activities. Greater Mumbai forms a peninsula rather than an island group. Thebuilding of Navi Mumbai can be regarded, as one of the most ambitious urbanplanning projects undertaken in indianite primary purpose was to contain thecongestion in greater Mumbai. With the setting up of Navi Mumbai and the nodes inNavi Mumbai were planned to be self-contained in terms of jobs and other services.

G.Paramasivan and J.S.Sacrtees in their article entitled The urban crisis- Ananalysis concentrates on environmental problems associated with thedevelopment of urbanization with specific reference to water pollution. Water is theelixir of life. Literally water is a source of life on earth. But fresh water is emergingas one of the most critical natural resource issues facing humanity. The water percapita availability in India is becoming less and less for simple reason that thepopulation is increasing at faster rate whereas total availability of water continues

to remain constant. There is no more fresh water on the earth now than it was 200year ago, when the population was less than 3 percent of its current size in growingnumber of places people are withdrawing water from lakes, rivers and undergroundsources faster than they can be recharged.


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This paper has covered one aspect of environmental problems in India in manyways. It is misleading to remove a consideration of cities environmental problemsfrom the environmental problems from the environmental with the wider society.

The quality of life in towns and cities in degenerating rapidly. The result is very

rapidly expanding urban population which despite disproportionate investments stillsuffers a rapidly declining quality of life and ranged rural system whose productivityis declining everyday and which keeps pushing more people into urban areas.

E.John Suriya Kumar in their study on Global Marketing: dominant cause of growing Urbanization: an attempt is made to explain how global marketing (G.M)and Globalization concepts have lead to increased urbanization in India. It isnecessary to explain the concepts of global marketing and globalization for a better

understanding of this paper.

Globalization is a process facilitating global marketing and driving force forurbanization at an increasing phase all over the world. Urbanization has explodedin India in the past two decades. Thus the real cause behind increased urbanizationis not only the central governments policies, but also application of the conceptGlobal marketing.

Since, global marketing firms say I am not an Athenian or a Greek but a citizenof the world; urbanization has exploded in Indian the past two decades. Thus thereal cause behind increased urbanization is not only the central governmentspolicies, but also application of the concept Global Marketing.

Analysis:


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financing urban slum improvement is implemented, successful scaling up of theseinitiatives would be difficult to undertake; and without successful large-scalepoverty reduction in India, it would be impossible to achieve the MillenniumDevelopment Goals. In India to address the needs of the urban poor, Indian financial

system in general and money market in particular are very strong.

The Indian Money market is not an integrated unit, it is broadly divided into twoparts viz organized and unorganized. There is compartmentalization between thetwo markets and as such the rates of interest differ in the unorganized sector fromthose in the organized sector. The organized sector of the Indian money marketcomprises of RBI, Commercial Banks, Foreign Banks, Co-operative Banks, andFinance corporations, Mutual Funds and the Discount and Finance House of India

Ltd (DFHI). The organized sector on the other hand is fairly integrated. Bothnationalized the private sector commercial banks constitute core of the organizedsector. Development finance institutions like IDBI & IFCI and investment financecompanies like the LIC, GIC, UTI and Mutual Funds are the other institutions, whichoperate, in the organized sector of the Indian money market.

The following welfare schemes implementing by the central and state governmentsin association with the financial system, which is there in Indian economy. Analysison some of the important schemes presented in the following:

Valmiki Ambedkar Awas Yojana (VAMBAY), introduced in 2001, focuses onshelter for the urban poor, with 20 percent of total allocation for communitysanitation facilities under the Nirmal Bharat Abhiyan (NBA) program. VAMBAY hasbeen implementing with 50% Central subsidy, 50% matching funds from State.From Government of India routed through HUDCO. 80% of total amount receivedfrom GOI spent on housing of which: 50% given as subsidy, 50% as loan.

National Slum Development Program (NSDP), launched in 1996, providesfunds for physical and community infrastructure as well as shelter upgrading to. Ituses the community structures developed first under UBSP, and later under SJSRY.


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Accelerated Urban Water Supply Project (AUWSP) is not strictly for the poor,but provides funding for water related infrastructure in small towns with less than20,000 in population. GOI started this program in 1993-94.

Urban Low Cost Sanitation (LCS). GOI initiated this program in 1980 and it aimsat liberation of scavengers through subsidies for conversions of dry latrines into lowcost pour flush latrines. 20% to be invested in the provision of water supply andsanitation (toilets) within the assisted slums

Urban Ashraya

Government of India takes loans from HUDCO. Housing loans ranging from Rs.25,000 to 40,000 provided per the size of city, excluding Rs. 5,000 upfront deposit.100% loan

Bhavanashree Programs

From various financial institutions. Loans between Rs. 30000/- to Rs. 40000/- Nosubsidy in loan interest rates (between 7% to 8% interest rates).

Program Loan Grant Subsidy Investment

NSDP 70% 30% Nil 10%

VAMBY 50% 80% 50% 20%

IAY 8% 80% Nil Nil

Urban Ashray 100% Nil Nil Nil

Bhavana Shree 8% Nil Nil Nil

Rating of Housing and Sanitation Programs

VAMBAY NSDP UrbanAshraya

Mythri Bhavanashree


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Targeting 1.67 1.33 1.5 3 3.5

Transparency 2 2 2 1 2

Efficiency 1 1 2 2 3Administrative Simplicity

1 1 2 2 3

Sustainability 1 1 1 1 2

Total Rating 6.67 6.33 8.5 9 13.5

(Key: 4 Excellent, 3 Good, 2 Fair, 1 Poor)

All subsidy programs should be evaluated on how well they improve the welfare of the beneficiaries. For instance, there are four possible outcomes from a housingsubsidy program: they could increase or decrease the quantity of housingconsumed by the beneficiary; and they could increase or decrease the cost of housing services as experienced by the beneficiary.

When economists talk about efficiency of subsidies, they have in mind two kinds of efficiencies. Consumption efficiency measures whether the valuation thebeneficiary places on the subsidy is equal to the cost of providing the subsidy.Production efficiency measures how the market value of the subsidy compares tothe cost of providing the efficiency. Taking both these efficiencies in aggregategives us the program efficiency. Needless to say, to even get a summary measureof these inefficiencies one needs data on the real cost of the subsidy as well as themarket price of the subsidy and the valuation that the beneficiary places on thesubsidy. It is therefore, very hard to pin down the program efficiency in developingcountry subsidy programs.

Conclusion:

At the outset, it is clear from the above, discussion, that there are hard realities interms of incidence of housing, sanitation etc shortages in urban areas experienced


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by poor and low income groups with inappropriate and ineffective policyintervention. And a major chunk of the financial resources needs to be deployed forimprovement in living environment, better access to amenities.

References: -

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--------and Gupta, S. (1996): "Migration Urbanization and Regional Inequality",Economic and Political Weekly, 31(52), December 26

Kundu, A., Bagchi, S. and Kundu, D. (1999): "Regional Distribution of Infrastructureand Basic Amenities in Urban Indias Issues Concerning Empowerment of LocalBodies", Economic and Political Weekly, 34(28), July 10

Mayo, Stephen K. 1986. Sources of Inefficiency in Subsidized Housing Programs: AComparison of U.S. and German Experience. Journal of Urban Economics. 20: 229-

249.

Mehta, M. and Satyanarayana, V. (1996): Pricing and Cost Recovery for UrbanServices, Community Consulting International, and New Delhi


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Nagraj, K. (1987): "Urbanization in Tamil Nadu, Karnataka and Andhra Pradesh" inAlam, S. Manzoor and Alikhan, F. (eds.) Perspectives in Urbanization and Migration India and USSR, Allied Publishers, New Delhi

Premi, M. K. (1991): "Indias Urban Scene and Its Future Implications", DemographyIndia, 20(1)

Sovani, N. V. (1966): Urbanization and Urban India, Asia Publishing House, Bombay

Turner, R. (ed.) (1962): Indias Urban Future, University of California Press, andBerkley

--------(1998): Reducing Poverty in India: Options for More Effective Public Services,

World Bank, Washington, D.C.

United Nations (1995): World Urbanization Prospects, Population Division, and New York

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