Noida and Gurgaon stand for two radically different approaches to economic development. The jury is still out on which is better.
In the first model, the state — in this case the Noida civic authorities — provides infrastructure before economic activity commences. Hence, municipal bodies must acquire land cheap to lay roads and water and sewage lines.
In the second, it is assumed that new houses built in Gurgaon on land bought by developers at market rates create a demand for utilities. These public goods grow alongside the new private townships or follow them with a lag.
On paper, both yield the same result: planned cities.
However, as people living in either of Delhi’s fastest growing suburbs will attest, market forces deliver a reality far removed from the one created by government intervention.
The differences lie in the scope of abuse present in the two approaches.
State procurement of land is vulnerable to crony capitalism. Allowing a relatively free market for land, on the other hand, reduces the likelihood that civic infrastructure will eventually measure up. In either case, it is a failure of governance.
Yet the political fallout of botched land acquisition is significantly more damaging. The golf courses built on farmland in Gurgaon score lower political points than the ones in Noida. Taps running dry in houses of the middle class by contrast make for tame news copy.
In any case, Indians living in glass and steel high rises are willing to shell out extra for bottled water, personal generators and private guards.
India does not have enough new affluents to matter at the hustings. Farmers being told they are being gypped of their land are an altogether different, and potent, constituency.
If the State is the weak link in either model of development — not being an honest broker in the one and failing to deliver services in the other — it makes sense to examine whether markets provide end-to-end solutions in India’s urbanisation.
Gurgaon shows the market works for buying land and building houses on them. There is enough evidence, within India, that private provision of municipal services not only delivers but is a viable model. The bloke buying bottled water at Rs 5 a litre and captive power at Rs 11 a unit will gladly pay if he gets water fit to drink and uninterrupted power.
Both will be cheaper as the cost is spread wider. Those who cannot afford them can be subsidised by cash transfers. User charges for municipal services will make or break our cities.
Utilities must be taken off the subsidy transfer mechanism.