Saturday, April 23, 2016

Economic growth is growth of Indian cities

Economic growth is growth of Indian cities

Nisha Desai Biswal

The pace and scale of India's past and future urbanisation are simply staggering. Twenty-five years ago, if you drove 30 kilometres south of here to Gurgaon, you'd see mostly farmland, and the population then was about 120,000. Today, Gurgaon has 2.3 million residents and a gleaming skyline of glass and steel.

India's cities have added 90 million new residents over the last 10 years, and in the next 15 years, 250 million more Indians will have moved into cities, bringing the urban population to some 600 million - nearly twice the population of the United States today. Delhi will likely surpass Tokyo to become the largest city in the world, and Ahmedabad, Bengaluru, Chennai, and Hyderabad will all become megacities, with over 10 million people each. The GDP (gross domestic product) of Mumbai's metro area alone will be larger than Malaysia's is today.

So when we talk about economic growth in India, we're basically talking about the growth of its cities. Over the next decade and a half, India's cities could account for 70 per cent of all new jobs and 70 percent of GDP. The cities are where most of the one million people entering India's workforce every month will find their jobs. But to pull all this off will require a tremendous amount of investment - about $1 trillion over the next 15 years, an unprecedented amount of funding and about eight times what India is spending today. According to McKinsey, 70 to 80 per cent of the infrastructure that India needs by 2030 is yet to be built.

It's a tall order, but if it's not filled, demand for affordable housing will be four times supply, demand for water will be two times supply, demand for sewage treatment will be three and half times supply. So the right investments in urban infrastructure and services will be critical for India's economic growth. The right policies could help India leverage its demographic dividend and launch hundreds of millions of people out of poverty and into the global middle class, transforming India and the region.

India's economy could drive global economic growth, bringing shared prosperity across the world, including to the United States. And that is why we have made economic diplomacy such a major pillar of our relationship. Trade between our nations has grown by a factor of five over the last 15 years, to over $100 billion. And we are working hard to accelerate that growth. Last year, we elevated our economic ties by holding our first-ever Strategic and Commercial Dialogue. The new commercial track of the dialogue had several work streams, such as facilitating help to build India's smart cities, and strengthening the business climate.

As part of that latter effort, we've also reinvigorated our CEO Forum, which gives our business leaders input into government policymaking in trade and investment, technology exchanges, and workforce development. We were also able to break through a deadlock on the Trade Facilitation Agreement at the WTO, and, through our Trade Policy Forum, we agreed on comprehensive work plans in services, agriculture, intellectual property, and manufacturing. These moves are already paying dividends, and American investors are showing with their dollars that they believe in India. According to data compiled by the US Treasury, our companies now invest more in Indian equities - over $12 billion in 2015 - than they do in China. And according to the US-India Business Council, US firms invested over $15 billion in India in the last two years, and will reportedly sign deals worth another $27 billion over the next two years.

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