Growth unlimited

India’s cities are expanding on a larger scale and at a faster pace than ever before. Worsening urban decay, gridlock and poor quality of life for citizens are foreseen by a new report from the McKinsey Global Institute (MGI)—India’s urban awakening: Building inclusive cities, sustaining economic growth.

The report finds that a lack of effective policies to manage urbanization could jeopardize India’s GDP growth rate. If the country makes and executes the right policy choices, it could boost annual GDP by 1 to 1.5 percentage points, taking the economy close to the double-digit growth it needs to create sufficient jobs for the 270 million people expected to enter the working-age population over the next 20 years.

The report projects that the country’s urban population will soar to 590 million in 2030, from 340 million in 2008. India’s cities could generate 70 percent of the net new jobs created by 2030, produce more than 70 percent of the country’s GDP, and stimulate a near-fourfold increase in per capita income.

In infrastructure, MGI projects that the economy will need 700 million to 900 million square meters of new residential and commercial space a year—equivalent to adding more than two Mumbais or one Chicago. In transportation, India will require 350 to 400 kilometers of new subway lines annually (more than 20 times the subway capacity built over the last decade) and between 19,000 and 25,000 kilometers of roads (nearly equivalent to the amount India has built over the last ten years). Yet India has traditionally underinvested in its cities compared with the countries of other urban centers around the world (exhibit).

A wake-up call? All the above will call for massive energy. Can India do it without new sources? More important will be how we take environmental considerations into account - like water management, air quality, green cover.