India`s urban population increased from 10` 8% of the total population in 1901 to 19.9% in 1971. The total population` which was approximately 239 million in 1901` increased to 548 million in 1971` whereas there was an increase of 130% in the total population there was a 320 % increase in the urban population (Gopal Bhargava)
The percentage of workers engaged in the primary sector remained relatively static between 1901 when it 71.8% to 72.6% in 1971. The percentage of workers in the secondary sector has declined marginally from 12.5% in 1901 to 10.7% in 1971. In the tertiary sector` the proportion in 1901` which was 15.7%` has increased marginally to 16.7% in 1971. This is contrasted with a National Income contributed by the primary sector of 66.3% in 1901 to 44.1% in 1971. The percentage of National Income contributed by the secondary sector increased from 11. 7% in 1901 to 23. 2% in 1971. The percentage of National Income contributed by the tertiary sector increased from 22% in 1901 to 32.7% in 1971. From this data it can be observed that there has been a redistribution of wealth in favor of the secondary and tertiary sector. It can also be concluded that though the absolute number of people working in the secondary and tertiary sectors has increased` there has been little if any solution to the magnitude of the problem facing the economy. It can also be concluded that due to pressure of population in rural settlements` there has been a net migration of people from rural settlements to urban areas.
The urban planner is caught in the dilemma how to cope with this increased pressure of the population on the cities. The options open are either to stop or reduce migration from rural settlements to the cities or to develop the cities and provide an occupation and basic amenities for the unemployed and under employed in the cities.
The local administrator of a city in India has the following sources of finance available:
(a) Government grants: These are mainly used for developing electricity` water supply` waste collection and disposal;
(b) User fees: These are got from transportation‚ electricity and water supply charges;
(c) Self-generated: These are from property tax and octroi charges.
According to an official of the Town and Country Planning Organization who declined to be` identified said user fees were far below the costs incurred in providing these services. The politician who refuses to grant the utilities adequate charges for providing these services holds the bureaucrat struggling to balance his books in a vice. Infect, ‚according to the official electricity is supplied at a third of its cost. As charges for utility services are exceptionally low` there is carelessness in their use and utilities can improve services only slowly if at all.
The water supply in most cities in India is of poor quality and is inadequate. Bureaucrats are at pains to explain that good quality water costs money. As water utilities are unable to realize the cost of supplying water the quality of water provided to most residents within the city is of poor quality. According to medical research` good nutrition plus clean drinking water eliminates 97% of disease‚s affecting people in developing countries. (Encounter Magazine)It`s the personal view of the writer that deep ground water is best for drinking as it is clean due to improved filter technology can saves health bills)Due to increased aviation activity the quality of rain water has deteriorated and should ‘if possible be abandoned)
In analyzing the policy dilemmas and problems facing planners in India it would perhaps be useful to contrast policies followed in India with those followed in certain other countries which have done comparatively better. In this connection ‘contrasting development with that of South Korea could prove useful. Whereas development in India has taken place amid increasing inequality where the poor have got poorer and the rich richer` substantial redistribution of wealth in favor of equality has taken place in South Korea.
At this point ‘I feel an outline and assessment of India`s fiscal trade and economic planning at the macro level may prove useful in understanding the more specific problem of urban development.
DEVELOPMENT PLANNING AND FISCAL POLICY IN INDIA
Planning for development in India after independence was initiated under 5 year plans by the then Prime Minister Jawahar Lal Nehru. The first 5-year plan put greater emphasis on agricultural development to that of Industrial development. It was thought that as subsequent plans would unfold ‘agriculture and its infrastructure development would play a decreasing role with an increasing role for heavy industry and urban infrastructure development. The first 5 year plan can be summed up as successful as agricultural production in the mid-fifties exceeded expectation. This led to greater emphasis on developing heavy industry in the core sector in the second and third 5-year plan. This emphasis on industrial development had to be re-evaluated in 1962 following the Sino Indian war when defense expenditure emerged as an important new significant factor for channelizing resources.
With India`s population rapidly increasing ‘the success story of agricultural production in the 1950`s became a nightmare amidst the droughts of the mid 60`s. The condition was contained somewhat by American assistance under PL 480` only to be drastically reversed following the Indo Pak war in 1965 when The American administration suspended food assistance to India.
These developments called for a re-evaluation of development priorities in favor of defense and the development of agriculture.
Under the development strategies earmarked by India`s planners infrastructure and core sector development were to be handled by the public sector and were developed under social principals with strong political and labour control. This strategy called for maximum possible wage to workers with a fair price to consumers. Labour discipline was at best poor and production inefficient. This general cycle of labour indiscipline ‚relatively high wages for workers and relatively low prices for public sector products led to the public sector not earning a surplus in its entirety for a single year since its inception.
The private sector was subjected to high rates of taxation with restriction of activities of the larger industrial houses under the monopolies and restrictive trade practices act. Some sectors of the economy were reserved for the small-scale sector ‘which did not have the resources for effective planning and could not achieve economies of scale in production.
This strategy led to the production of poor quality goods and services combined with dishonesty in tax returns. The former factor led to non-acceptance of Indian products in international markets and the latter which combined with the effects of deficit financing in India`s budget led to a parallel economy that resulted in the suppression of essential commodities at times of shortage. Furthermore ‘the threat of nationalization lingering in key sectors of the economy led to their neglect by the private sector. The strategy envisaged equitable distribution along with development achieved neither equality nor development. The public sector took up a large surplus of the private sector as it was running at a net loss. In the light of the above restrictions` though India`s direct tax rates were amongst the highest in the world their total realization was approximately 3% of national income. This can be contrasted with countries like South Korea` Taiwan and Japan which were reduced to the same level of development to India in 1945 having developed much larger tax bases through active encouragement and promotion of the private sector by way of lower rates of taxation. These countries were thus able to acquire resources through the development of the private sector to promote infrastructure development and welfare. Based on the experience of countries like South Korea` Taiwan and Japan` a strong case for reduction of the rate of taxation in India and liberalization of licensing procedure for clearing projects in the private sector.
TRADE POLICY AND FOREIGN INVESTMENT
The trade policy in India is characterized by restrictions in import by both way of duty and licensing of imports. In recent years ‘the policy has been to some extent been liberalized` but is still far too restrictive. Products are produced in almost their entirety in India the principals of comparative advantage are not considered. As already pointed out economies of scale do not exist in most industries. As domestic producers are protected by high tariff rates and other methods` there is little incentive for local producers to bring prices and quality of their products to international standards. A comparison of this policy with that of Japan and newly industrialized countries reflects unfavorably on India. A small colony as Hong Kong has almost the same amount of trade as India. Development strategies adopted by Japan in its earlier stages of development emphasize the import of products requiring high technology and emphasize that part of production for the domestic economy which cater to the area in which Japan had an advantage namely cheap skilled labour. Japan thus permitted at liberal rates import of high technology manufactured parts and restricted the import of consumer goods` which were capable of being manufactured in Japan. Gradually Japan and later the newly industrialized countries acquired licenses from advanced countries for the manufacture of high technology products always keeping in mind the principals of comparative advantage and economies of scale. Thus for instance while in India they developed three different manufactures of motor cars with relatively small capacities in Japan manufacture of motor cars was permitted much larger capacities and this example is typical of any industry in Japan. Thus while Japan was able to profitably manufacture and compete with the rest of the world Indian industry stagnated.
Depreciation of products was perhaps the lowest in the world. This crippled development of technology and manufacture of superior products.
Though India permits foreign investment in high technology products ‘foreign investors have become disillusioned with the long drawn out procedures before investment` the corruption of decision-making bodies and the high rates of taxation. This is sad as India with the third largest technical manpower in the world and salaries for skilled labour and technical manpower amongst the lowest in the world has a favorable climate for foreign investment. With periodic recessions striking industries all over the world` planners will look to India for development.
A frequent argument against foreign investment is that these investors come as subsidiaries of the holding company. They invest in the most profitable sectors and repatriate a large proportion of their profits. A way out of this problem could be an increase in competition from the international market for the industries where foreign investment takes place. This can be effected by lowering tariffs on those sectors of the economy where foreign investment is prevalent. This policy should discourage abnormal profits in the specified sectors. Furthermore‚ foreign investors complain that they repatriate a large proportion of their profits due to restrictions on further investment on their part by the local government. The ethics of foreign investment are debatable` but it is the opinion of the writer that the concerned government should adopt an employment maximizing strategy. As foreign investment promotes employment this factor should be considered.
India has recently promoted free trade zones in 100% export oriented units from which all equipment and raw materials can be imported relatively free of duties. Products of these zones and these units are sold with a markup of 20%‚which is a big hurdle. In an environment where organizations operate on razor thin profit spreads this policy can bear little fruit except in units exporting to the Soviet Union and Eastern Europe where price is not a criterion.
The digression from the main topic of this paper in the preceding two sections has been done to point out that urban development cannot take place at a satisfactory level unless there is a ratiocination and re-orientation of the entire policy and planning of India to make economic units viable and free resources for development of urban sectors. As India does not have a welfare system as yet if policies are re-formulated to denationalize various sectors within the economy surplus funds and organizational capacity of the government can be released for tackling those sectors in which the private sector has little interest mainly urban and rural infrastructure development. Resources can be further expanded to form industrial cooperatives based on the model set up in Mondragon ‘An the Basque region of Spain.
The cooperative experiment in Mondragon has exceeded the performance of the private sector in the same region. An experiment that is currently the subject of intense managerial and economic study may provide an alternative or parallel form of development side by side with the private sector. The Mondragon experiment is in my opinion of sufficient degree of importance to warrant greater illustration in this paper. (Nondragon: An Economic Analysis. Thomas Logan)
the Mondragon experiment started with a small experiment in 1943 to develop skills among workers. The institute was financed primarily by donations from individuals and organizations in the region.
By 1956‚a technical base had been developed enabling the opening of two small cooperatives of 12 workers each. By 1965` the number of cooperatives had increased to 30 employing 3395 workers. This further increased to 50 cooperatives in 1975 employing 12` 543 workers. The 1979 figure was 70 cooperatives employing 15672 workers. The cooperatives consist of a General Assembly` Watchdog Council` Management Council` Social Council` Supervisory Board` Management` Accounts` Production` Marketing and Personnel Departments. The cooperatives imbibe modern managerial principals. Each cooperator had to buy his stake in the enterprise. When a cooperator lacked the necessary finances` the Cooperative Bank provided a loan. The cooperators got their proportions of the profits of the cooperative. A proportion of the profits were retained by the cooperative to develop the cooperative further and increase employment.
While selecting products for manufacture advice was taken from independent consultants for assessing the marketability and viability of the product. The products are licensed from existing manufacturers and at times from other countries.
Labour relations have been found to be far better than the average in the region as also the absentee rate.
In fact in some cooperatives computers are used for processing Information. The cooperatives have of late acquired a centralized technology research and development center. This center has been responsible for creating improved techniques of manufacture and has licensed some products to other organizations.
The experiment is all the more remarkable as the cooperatives have had little support from the Government of Spain. The Cooperative Bank is not permitted legally to generate funds from bonds and other sources available to other banks in Spain.
In India ‘which follows a relatively socialist pattern of planning for development` a study as to how the Mondragon Cooperatives have survived should prove invaluable` as the cooperatives in India are likely to get the backing of the government. To set up cooperatives on the scales required for a large country like India` requires a large resource base. These resources could perhaps be generated from resources freed from the public sector on denationalization. Training institutes could be set up to train cooperators. In India there are a large number of educated unemployed people. These people could be utilized to man supervisory and managerial positions after training imbibing them with the principals of cooperative philosophy and techniques.
MIGRATION TO CITIES
Though there has been a fair deal of migration to cities in India which is now approximately 20% of the total population ‘a comparison with Brazil which has 66% urban population indicates that the pressure on cities in India has not been as great as in certain other countries. In spite of this` services in metropolitan cities in India are of poor quality.
WASTE COLLECTION
A study undertaken in America indicates that economies of scale for the collection of solid waste are achieved unto 50000 residents only. This points to the fact that cities can have more than one waste collection agency. This can imbibe competitive spirit amongst waste collection agencies. The government organization may then tackle the more important problems of waste disposal.
As far as collection of sewage is concerned ‘sewage pipes could possibly be extended to neighboring villages thereby providing them with fertilizer and freeing rivers from pollution. This strategy could possibly be coincided with the building of underground railways so that a centralized piping system could be utilized. If urban sewage is used as fertilizer` the need for costly imported fertilizer will reduce or disappear.
COMMUNITY INVOLVEMENT
When urban settlements are planned participation by the community results in better and more liberal communities.
BUILDING CODES
There is need in buildings of cities in India to standardize codes in respect of firefighting ability. This is especially true of cinema halls.
URBAN HOUSING
There is a big queue of people awaiting the development of housing facilities in Delhi. According to an official of the Delhi Development authority ‘there were 800000 people awaiting housing facilities in 160000 units. The plans of DDA accommodate housing and other facilities for only half the number of people who come to Delhi from rural areas.
To counteract the influx DDA has recommended the development of satellite towns in and around Delhi to absorb some of the strains on its resources.
FINANCE
In most developing countries including India urban revenue collection is centralized. Resources of the revenue collection ‘authorities are at pains to explain that they cannot keep up with the influx to the cities. According to a report in American city and county idle cash among divisions and departments of urban administrative organizations should be pooled for more effective allocation of funds.
AMBULANCE SERVICE
In New York when the centralized ambulance service organization resorted to decentralization and a dispersed system cost was cut by 75% and resulted in a 40% greater availability of ambulances.
WATER
Water got from tube wells and hand pumps when equipped with a galvanized iron sand proof filter provides water which is both healthy for drinking and bathing. Unfortunately ‘the water table in most of India is receding and alternative sources have to be developed. To conserve well water it should only be used for drinking and water for bathing should be provided by the municipality without purifying the water. To further save costs of water the government can provide bottled drinking water at subsidized rates so that even the poor man can afford it. The bottles should be reusable to reduce costs.
CONCLUSION
In the paper an attempt has been made to inform readers about the need to generate surpluses in order to make urban and other development effective and in its ability to sustain long term growth. Towards the end of the article general points have been made to offer guidelines for future research.
With respect to developed countries and certain developing countries ‘for instance Brazil` India is as yet very low in the extent of urbanization. Giant urban settlements pose major problems in the long run with respect to maintenance and repair. For instance the sewage and water supply network in New York is failing and overburdened. Repair work cannot begin due to its high cost and the general disruption it causes.
Whether India`s underdevelopment with respect to the industrial age is good or bad is the subject of another paper.
ASHWINI KUMAR PURI
Dt. August 1983
Address: B-126‚ Anand Vihar`
Delhi-110092 INDIA
Afterword and Update: If a country does not adopt a minimum programme of capitalism ‘there is capital flight to the United States. It is for this reason a minimum capitalist programme for a country is absolutely essential. A. K. Puri also Known As Raj Posha Puri` B 126 Anand Vihar, Delhi 110092 India 3rd October 2004
