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Urbanisation has been on the rise in India, with an increasing number of people moving from rural areas to urban cities in search of better opportunities. This has led to tremendous pressure on urban infrastructure and services, including financial services.

Therefore, the issue of financial inclusion is increasingly becoming an essential aspect of sustainable development in urban areas, as it ensures that everyone has access to affordable and convenient financial services that are essential for improving their livelihoods and economic growth.
As the budget overviews of the Government of India continue to put emphasis on approaches like ‘capacity building’ and ‘opportunities for all’, this article intends to discuss the relevance of such development arguments towards financial inclusion in urban India and their relevance in building a sustainable future.

Capacity-building, without a doubt, is an essential approach toward financial inclusion in Indian cities. It involves building the capacity of individuals, communities and institutions to access financial services.
Measures taken by the Reserve Bank of India, such as setting up financial literacy centres, establishing the National Centre for Financial Education and conducting financial literacy camps are some examples. These measures aim to enhance the financial literacy of individuals and promote financial inclusion.

However, capacity-building on its own is not sufficient to achieve complete financial inclusion, as it does not address the systemic issues that exclude certain groups from accessing financial services. In this place, the approach of ‘opportunities for all’ can focus on creating an enabling environment for financial inclusion, where everyone has access to affordable and convenient financial services.

The exclusion of certain groups from accessing financial services is not due to their lack of capacity alone, but also due to discriminatory policies, lack of infrastructural access and limited availability of financial products and services. Financial inclusion is not just a matter of economic growth, but also a matter of social justice and ensuring sustainability. It can further reduce poverty, inequality and vulnerability in cities, which are essential for achieving sustainable development.

Therefore, while ensuring financial inclusion is recognised as an essential aspect of sustainable development in Indian cities in the recent Budget sessions, capacity-building can be successful in improving financial literacy and the approach of ‘opportunities for all’ is particularly relevant in building an enabling as well as sustainable future by promoting financial inclusion for all, including the vulnerable and marginalised groups.

Nonetheless, financial inclusion alone cannot guarantee a sustainable future for cities. ‘Sustainable cities of tomorrow’ must be planned and designed with the principles of sustainability in mind, which includes efficient use of resources, enhanced accessibility and availability of urban amenities as well as ubiquitous infrastructure development.

One step towards it is the proposed financial reforms in the Union Budget 2023-24 for urban areas to make them creditworthy for municipal bonds, emphasising sanitation and scientific management of waste and investing in the development of urban infrastructure through the Urban Infrastructure Development Fund (UIDF).

UIDF will be managed by the National Housing Bank and is expected to be used by public agencies to create urban infrastructure in tier 1 and tier 2 cities. The fund is intended to improve the financial health of cities and is complemented by a focus on improving the revenue streams of cities.

In total, the government of India has also allocated Rs 76,432 crore for urban development in the Union Budget 2023-24, which encompasses housing, transport, sanitation and other essential infrastructure.

While the highest shares of this allocation are for the Pradhan Mantri Awas Yojana-Urban (PMAY-U) (33 per cent), metro projects (30 per cent) and Atal Mission for Rejuvenation and Urban Transformation (AMRUT) (10.5 per cent), the allocation for Swachh Bharat Mission-Urban (SBM-U) (6.5 per cent) and National Urban Livelihoods Mission (NULM) (1.3 per cent) remain relatively low.

The allocation for SBM-U has increased from Rs 2,000 crore to Rs 5,000 crore, which aims to be complemented by marking a transition from manhole to machine-hole mode as a switch to mechanical waste management in all cities and towns.

There has been a reduction in the budget amount for PMAY-U due to the accomplishment of the Housing for All by 2022 target and the discontinuation of the credit-linked subsidy scheme (CLSS) for the economically weaker section, low-income group and middle-income group. These raise critical questions about the future of affordable housing in India.

The share of funds in the municipal budget reveals some interesting trends, while the allocation pattern indicates that the focus of urban development in the country is primarily on housing and transport, with less emphasis on livelihood and sanitation.

Transforming existing cities into sustainable cities requires a focus on the quality of urban planning, which includes taking the regional aspect of city management into consideration. A recent World Bank study (2022) highlighted that an investment of $840 billion is needed over the next 15 years, out of which $450 billion has been estimated to fulfil the needs for basic services in the cities (such as water supply, sewerage, among others).

The provision of funds for upgrading tier 2 and tier 3 cities is much appreciated, but the complexity of the urban system needs to be understood from a more local point-of-interest. The inferior quality of living in peri-urban areas, continuing urban sprawl and mismanagement of essential services in pockets, for instance, need to be addressed in a comprehensive manner.
Sustainable city development is a normative concept and encompasses investment in social capital and democratic spaces that can enhance a sense of community perception and civic engagements, besides developing infrastructure and promoting economic development. A clear vision for infrastructure financing and governance reforms is essential to ensure the successful transformation of existing cities into sustainable ones.

Sustainable development and financial inclusion are, therefore, two critical elements that go hand in hand in the growth and development of Indian cities. While sustainable city development theories can help us understand the principles of sustainability and how they can be applied to urban planning and development, financial inclusion is crucial in ensuring that these principles can be realised on the ground.

The municipal budget is, therefore, an essential tool for promoting such a coherent development and providing a roadmap for the allocation of resources towards various development projects and other essential infrastructures and services.

Even though a review of the municipal budget in India reveals a significant emphasis on the concept of sustainable city development in recent years, there is still much work to be done to ensure that the principles of sustainability are fully integrated into the budget and that financial inclusion is adequately addressed.

A pragmatic budget allocation for urban development in India provides a starting point, but there is a need for greater emphasis on social and economic sustainability, and the promotion of financial inclusion to create ‘opportunities for all’. This requires a multi-dimensional approach that addresses the individual dimensions of sustainability to ensure that all individuals have equal access to resources and opportunities.