Investing in Urbanization in India

Published on 09/04/18 | Manab Sen | 3,434 Words

The BuyGist:

  • Hundreds of millions of people will move into Tier 1, 2 and 3 cities in India over the next couple of decades. We can debate the exact numbers, but regardless of the report you choose, the numbers are massive.
  • The already untenable living situation in some of these cities will get worse, if that’s possible. 
  • The already untenable traffic situation will get worse. Take a trip to Mumbai, Delhi or Bangalore and you’ll know what I mean. It’s like LA but worse, much worse.
  • Federal, State and Local governments will respond – not because it’s the right thing to do, but because that’s where the vote-banks are shifting. We’re already seeing some signs of this after 70 years of shoddy lawmaking, corruption, and neglect.
  • Outdated laws that have led to corruption and neglect will be corrected. This has already begun.
  • The money will follow. There are 2 layers to this: 1) Tax Revenue and 2) Allocation of Funds. Directionally, both are looking positive. 
  • The most pressing needs are:
    • Housing for the influx of people.
    • Waste Management
    • Water
    • Roads and Bridges
    • Mass Transit – there is simply no room for more cars.
  • 5 investable companies have shaken out of this: 3 Mass-Transit companies, 1 Trucking company and 1 Water Technology company. Time to zoom in on 1 of them.

Time to clean up.

Whenever I travel to India, my emotions are always wildly mixed - excitement and trepidation; elation and despair. Landing at Mumbai’s new gleaming International airport fills me with eager anticipation of a changed India. But the drive from the Airport to “town” is always a reality-check.  As I approach the narrow lanes of Dharavi - one of Asia’s largest urban slums – my anticipation quickly deflates. Squalor seems to be everywhere, people are eking out a living on roadsides and I see children in tatters playing in the dirt. A few minutes later, I see signs of glamorous changes here and there, albeit at a leisurely elephantine gait. But is the elephant now being chased by a tiger?

There appears to be a consensus among pundits that between 2015 and 2030, about 170 million more Indians will inhabit urban areas. That is over and above the 420 million people already in urban India as of 2015. By 2030, 40% of India’s population will be urban, amounting to about 590 million people. That’s nearly twice the population of the United States.

While these numbers are mind-boggling, the fact is that India is far behind the world on urbanization. The World average for 2017 is that 55% of all population live in “Urban Areas”. India stood at 33.5%. That was even less than sub Saharan Africa. The developed world is at 70-80%. India’s standing on urbanization equals that of the least developed countries in the world (UN Classification); notably lower than China 58%; Brazil 86%; Indonesia 54%; Mexico 79%; South Korea 82% (World Bank Data).

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