India budgets for smart infrastructure

Wed, 2015-03-18 06:00 -- SCC Staff

By Pratap Padode
Smart Cities Council India

The 2015-2016 Union Budget stayed away from using the term smart cities, unlike the one in 2014-2015 which made a special mention, but that doesn’t imply that the Indian government has lost interest in smartening the nation.

Last year’s budget allocated $1.27 billion for the development of 100 smart cities. (Note all amounts in this article are in U.S. dollars.)  In this year’s budget, famously touted as the country’s first federal budget, the government has made provisions for "smart practices and smart living." For urban development, $1 billion has been allocated to the Urban Rejuvenation Mission, while $84 million will be spent on habitation and development of 100 smart cities.

Some of the salient features of the budget that speak to the government’s growing interest in smart cities include::

  • Infrastructure: Infrastructure has been given much more emphasis this year with the setting up of a National Investment and Infrastructure Fund (NIIF) with an annual flow of $3.4 billion. There will be increased participation from private players as the government has decided to take on some of the risks in order to make PPP more attractive. Overall, investment in infrastructure will go up by just under $12 billion in the year 2015-16, over the year 2014-15 from the Centre’s Funds and resources of Central public sector enterprises (CPSEs). Roads and railways too have been provided with an additional allotment of $4 billion. Further, the DMIC corridor which is playing host to some greenfield smart cities development has received an allotment of $200 million for basic infrastructure. As a result of the above, a direct and indirect infusion of around $40 billion will be towards infrastructure.
  • Tourism: Also taking into account the thriving tourism sector in the country, government has also envisaged landscape restoration, signage and interpretation centres, parking, access for the differently abled, visitors’ amenities, including securities and toilets, illumination and plans for benefiting communities around them at various heritage sites. Swachh Bharat Fund has been created to facilitate channeling of money from individuals and companies for one of Prime Minister Narendra Modi's pet schemes. The contributions will be given tax exemption. The programme entails an investment of nearly $34 billion over the next five years to construct 120 million toilets in India by 2019.
  • Renewable energy: Tapping the power of sun, renewable energy capacity has been revised to 175,000 MW till 2022, comprising 100,000 MW solar, 60,000 MW wind, 10,000 MW biomass and 5,000 MW small hydropower. Five Ultra Mega Power Projects of MW 4000 each have been planned with all clearances in advance ( i.e. in ‘Plug & Play’ mode) for private sector participation which are expected to unlock investments up to $17billion.
  • Digital India: This is a $19 billion government initiative that seeks to transform the country into a connected economy, attract investment in electronics manufacturing and create millions of jobs. The National Optical Fibre Network Programme is rolling out an optic fibre network of 0.75 million kms, networking 0.25 million villages. A sum of $42 million has been allocated for the Digital India Programme and telecommunication and electronic industries manufacturing under a “Make in India” plan. An e-biz portal has been launched which integrates 14 regulatory permissions at one point in order to facilitate ease of doing business in India.
  • Money to states: Opting for cooperative federalism, thus giving more power to the state governments of the country, Budget 2015-16 has accepted 14th Finance Commission’s recommendation of substantially higher devolution of Union taxes to States. At 42% devolution, it is expected that the states’ share will increase from $55.6 billion in year 2014-15 to about $87 billion in 2015-16, a quantum jump, which would enable them to address their specific needs through flexibility in design, implementation and financing of programmes and schemes. This would allow the states to have better financial ability in fulfilling the needs of their cities.
  • Direct benefits transfers: According to the Economic Survey of 2014, there are about 125.5 million Jan Dhan bank accounts,17,757 million Aadhaar ( social security) numbers and 904 million mobile phones in the country. To prevent leakages of social benefits from reaching the under-privileged, direct transfer of benefits has been initiated. A sum of $1 billion has so far been transferred directly, as LPG (liquefied petroleum gas) subsidy to 115 million LPG consumers. This is to be extended further with a view to increase the number of beneficiaries from 10 million to 100.3 million.
  • Social security: A functional social security system for all Indians will be created, especially the poor and the under-privileged. A Senior Secondary School is to be built within 5 km reach of every child and a provision to be made for medical services in each village and city. An allocation of $17 million has been made for Nirbhaya Fund formed for women's security and safety.
  • Innovation: An Atal Innovation Mission (AIM) will be established to involve academics, entrepreneurs and researchers and draw upon national and international experiences to foster a culture of innovation, R&D and scientific research in India.
  • Livability: There’s also a provision for Swachh Bharat Cess, which will be used to improve the quality of life and public health.

Despite not finding any mention in the new budget, the government is creating the building blocks which are paving the way for 100 smart cities. The provisions mentioned in the Budget 2015-16, if truly practiced, will provide a roadmap to the state governments to help create and govern smart cities more effectively. Improving India’s infrastructure is definitely the first step towards building it as a smart nation.  


Pratap Padode has run an infrastructure research and B2B publishing organization the last 17 years in India.