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«“Manufacturing cities: Industrial policy and urban planning in India”1 Neha Sami* Shriya Anand ©Neha Sami & Shriya Anand (*) Neha Sami & Shriya ...»

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4 The number of Census Towns increased from 1,362 in 2001 to 3,894 in 2011 (Pradhan, 2013).

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existing cities. This model of growth draws heavily on the successes of other East Asian countries such as China and South Korea where particular zones were developed to facilitate export-oriented industrialisation.

In the Indian case, this includes the development of Special Economic Zones (SEZs), National Investment and Manufacturing Zones (NIMZs), and new towns that focus on specific types of industrial and economic activities. More recently, the focus has shifted from SEZ development towards the creation of industrial corridors. The industrial corridor development policy, while primarily focused on building manufacturing and industrial centres, is the first time that the Government of India has explicitly attempted to link economic and industrial development to urbanisation (Anand and Sami, 2014).

As these new spaces of production (Brenner, 2004) emerge, challenges of governance, planning and policy arise with them. These spaces are often created through industrial policy mechanisms and governed by various industrial and economic agencies, instead of being governed as urban areas with elected local governments according to the provisions of the 74th Constitutional Amendment (CAA). As Indian policymakers prepare for an urban transition that is industryand services-led, they increasingly believe that this transition will be driven by these settlements that lie outside existing urban centres and outside the purview of existing arrangements for urban governance as well as government schemes and programmes targeting cities. Consequently, these settlements function as spaces of exception, economically (Ong, 2006), as well as in terms of governance, and there is little thought given to the implications of the transformation of these newer spaces into more urban-like settlements.

The development of new economic settlements like SEZs, NIMZs, and industrial townships is one way of addressing the question of growth and job creation.

However, while this may be an attractive strategy, there are certain limitations to the feasibility of such an approach. Any such strategy needs to take into account the current and projected economic and demographic reality of India: data shows that

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most of the Indian urban economy is concentrated in small enterprises or in the informal services sector (Anand et al., 2014b). The development of integrated industrial corridors offers a potential opportunity to leverage this in order to integrate new, emerging settlements with existing economic and urban centres.

These types of emerging settlements and the policies associated with them are especially interesting because they display urban-like characteristics but are not currently governed as such. As the Indian government invests in developing such policy, it becomes important to understand the implications of the growth of such settlements.

The data for this paper come from primary and secondary sources. Primary data were collected through semi-structured interviews with a wide range of stakeholders. Interviews were conducted in Vadodara, Ahmedabad, Gandhinagar, Jaipur, and Delhi. We interviewed government officials at municipal corporations, urban development authorities, industry development corporations, investment promotion bodies, consultants, industry associations, industry and real estate developers, real estate brokers, urban planners, academics, journalists and citizens.

The interviews helped us understand the process of urbanization, industrialization and planning. They also helped us gauge perceptions of the different stakeholders on the growth and urbanization process in their city and state. However, since several of our respondents spoke to us under conditions of anonymity, they are not identified or directly quoted in the text below.

Secondary data came from literature on the DMIC and similar corridors and the policy, legal and organizational frameworks within which such a programme functions. We also studied the various reports on the planning and implementation of the DMIC. We looked at similar initiatives in other countries and their impacts on the economy. We have also been tracking the DMIC in various media to see its progress over the years, since its commencement.

The paper is organised as follows. Section 2 lays out the policy and institutional environment within which these instruments have emerged, and are governed and

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managed. We examine both the urban and industrial policy environment, discussing the details of both the SEZ policy as well as the newer industrial corridors. Section 3 deals with the governance and politics surrounding the development of the corridors, specifically the DMIC. Section 4 focuses on the assumptions, risks, and adaptability issues with the implementation of these policies in the Indian context.

2. Policy and Institutional Environment This section analyses the current policy and institutional arrangements for urban as well as industrial policy governing the types of economic settlements referred to above. This is not intended to be a comprehensive review of urban policy or industrial policy, but rather focuses on those aspects that are relevant to the creation of new economic settlements and their implications for India’s urban future.

The executive branch of government at both state and national levels is organised into line ministries, each of which is responsible for a particular sector or area. In the case of industrial and economic planning, the responsibilities are shared by the Ministry of Finance and the Department of Commerce and the Department of Industrial Policy and Promotion, both housed within the Ministry of Commerce and Industry. However, while there is potential overlap in planning and development of regions with other ministries such as the Ministry of Urban Development, there is little actual coordination between these. Consequently, policies are often implemented in isolation.

While urban policy is largely directed by state governments, parastatal agencies, and urban local bodies (ULBs), the central government continues to exert considerable control over policy priorities and expenditure through centrally sponsored schemes, programmes, and missions. State governments are responsible for constituting municipal governments, approving master plans, and through their parastatal bodies, they also plan and finance urban infrastructure, housing, and

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transport. Urban local bodies are responsible for implementing plans and programmes as directed by higher levels of government, and carrying out municipal and administrative functions. However, this is despite the devolution of a wider set of functions and responsibilities through the 74th Constitutional Amendment Act (CAA), which emphasised decentralisation and mandated the devolution of power to elected ULBs enabling them to function as the democratically elected third tier of government. In practice, however, city governments continue to play a limited role over these expanded functions, partly due to the fact that the allocation of functions and devolution of powers was left to the discretion of state governments (Sami, 2012).

Despite shifts in urban policy and funding, a significant proportion of urban residents experience high levels of deprivation. Indian cities continue to suffer from fragmented governance arrangements, poor levels of infrastructure and services, and lack adequate employment opportunities. The latter is related to the fact that India’s economic growth has been capital and skill intensive, and one of the recurring goals of the Five-Year Plans has been focused on promoting industrial growth in order to generate employment.

While there are aspects of industrial development that are controlled by the central government, including transportation infrastructure, and income and corporate taxation, much about industrial development trajectories is determined at the state level. States are responsible for land acquisition, and planning and providing industrial infrastructure through parastatal agencies at the local level. However, there are certain instruments adopted by the central government such as industrial corridors, where the overall planning and vision comes from the national government, while implementation of projects rests with the states. Although this paper focuses primarily on industrial corridors, we briefly discuss SEZs below since these were the precursors to the industrial corridors.

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2.1. Special Economic Zones (SEZs) The Government of India announced the SEZ Policy in 2000, which was followed by the passage of the SEZ Act in 2005. The main objectives of the Act were to attract domestic and foreign investment, promote exports, create employment, and develop infrastructure. The assumption was that SEZs would act as engines of growth by triggering a large flow of investment for building infrastructure and productive capacity, ‘leading to generation of additional economic activity and employment opportunities’ (Government of India, 2009). As of 2014, there are 196 operational SEZs in India (ibid.). While particular instances of SEZs have been successful, on the whole, they did not generate the anticipated levels of output, investment, exports, and employment.

The performance of SEZs has been critiqued by observers for multiple reasons.

First, the revenue loss to the exchequer arising from tax exemptions and incentives to SEZs has not led to commensurate gains in economic activity, employment generation and investment that were predicted by the government (Comptroller and Auditor General of India, 2014). Secondly, land acquisition for SEZs has led to the loss of land used by marginalised communities for cultivation or as common grazing land (Banerjee-Guha, 2008). Moreover, the ownership of land has been transferred to private developers, and there have been several irregularities in the use of this land with not all of it being put to its stated use; a recent report of the Comptroller and Auditor General of India highlights specific instances of land being used by developers to raise finance or for purposes other than those approved in the SEZ application (Comptroller and Auditor General of India, 2014).

The third concern has been that of balanced regional development and employment generation. Critics argue that the policy has the potential to worsen trajectories of inequality by concentrating development further in coastal and already industrialised regions. Moreover, recent data on SEZ approvals shows that about 60 per cent of the 388 notified SEZs as of April 2014 are in the IT/ITeS sector with limited employment-generation potential (Banerjee-Guha, 2008), and

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there are only 16 notified multi-product SEZs, which did not lead to the generation of additional economic activity or employment, nor did they help with diversification of economic activity into manufacturing (Mukhopadhyay and Pradhan, 2009a).

Several different reasons have been put forward for the inability of the SEZ policy to achieve its stated objectives: difficulties with land acquisition, and the relative openness of the rest of the economy, and the fact that private developers were unable to finance projects at this scale because they did not get preferential borrowing rates from banks (J. Bhagwati in Palit and Bhattacharjee, 2008; CUTS International, 2007). The new industrial corridor policy that successive Indian governments have proposed seems to be an attempt to deal with some of these issues.

2.2.Industrial Corridors The current push to develop industrial corridors follows earlier policies like the development of the Golden Quadrilateral and the North-South and East-West corridors. These industrial corridors are being planned around the Dedicated Rail Freight Corridors (DFCs) that are being developed by the Ministry of Railways.

However, unlike SEZs, the corridor policy is relatively recent and therefore there is limited evidence about the impact, since most projects are currently in planning or implementation stage.

An early example of the industrial corridors is the Delhi-Mumbai Industrial Corridor (DMIC). Building on the DMIC experience, the Government of India is planning other similar corridors between Mumbai and Bangalore, Bangalore and Chennai, Amritsar and Kolkata, and the East Coast Economic Corridor. However, these are still in early stages of planning. Both the freight corridors as well as the industrial corridors have attracted a significant amount of international investment from agencies such as the World Bank, the Government of Japan, and the Government of the United Kingdom.

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Similar to the SEZS, the development of these industrial corridors has multiple stated goals, which include improving infrastructure, enabling exports, generating employment, and linking fast-growing regions to relatively poorer regions. While there are several similarities with the SEZs, the industrial corridor policy does have some key differences. First, although the state governments and their agencies carried out land acquisition for both the SEZs and the corridors, for SEZs, the ownership of the land was transferred to private developers while this is not the case with industrial corridors. The responsibility for planning, selection of locations, and the development of these corridors lies with the governments (even if they hire private consultants to assist with planning), whereas in the SEZ case, private developers took on the responsibility of planning, financing, and building the zones.

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