Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Smart(ing) Cities - Outside View by Nitin Gregory

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Smart(ing) Cities
May 4, 2017

World Bank data estimates that 54% of the world population lives in cities. For India, the number is 33%. These numbers are projected to increase dramatically, especially in Asia and Africa. The 'urbanisation' trend is well underway - and will continue for a while. Cities today are economic powerhouses; roughly 63% of India's GDP comes from cities.

People migrate to cities in search of opportunity. This creates a problem...and an opportunity. City infrastructure is stretched and inadequate. People are looking to save time, avoid congestion, and lower costs. This means a large consumer base (with purchasing power) is looking for solutions. Technology and capital are being channeled here to solve the problems of these vital cities.

What makes us smarter?

The definition of a 'smart citiy' is vague. Discussions about smart cities mention 'information', 'communication', 'connectivity', and other jargon like the 'internet of things' (I still don't know what that means). Some consulting firms have even come up with 'frameworks' and 'parameters'. I am going to skip all that. I will use a few example projects that make cities smarter and lives easier.

Vishakhapatnam is investing in a fiber grid network that will connect households, businesses, and government offices. It will increase connection speeds and productivity. Jaipur has installed smart street lights that adjust brightness based on 'traffic activity'. These are projects that improve productivity (the magic sauce). These and various other initiatives including better governance modes (apps and websites that provide government services/information) and infrastructure investments contribute to the well-being of the city and its populace.

These examples are finding ways to improve existing facilities to make them faster, cheaper, and more convenient. This is the intuitive direction of all progress - smart or otherwise. But we're still no closer to understanding 'smart cities'...

India and smart cities

Nevertheless, India has announced its vision to make a hundred of them. Sixty 'smart cities' have been approved and are on their way to implementation. Some of the projects that will presumably turn these cities into 'smart cities' include:

This is by no means a complete list of the government's projects, but it's a fair sample and it's a fairly standard list of city improvements. These are necessary and will definitely have a positive impact. Not sure if they make us 'smart' though.

Total funding per state is Rs 1,000 crore. The Ministry of Urban Development will provide Rs 500 crore over five years to a selected city, which the state government will match. The cities can generate additional funding through private sector participation, municipal bonds, etc.

What is in a name?

The capital investment (per capita) of India is seven to ten times lower than most large economies. The lack of capital investment has been a significant drag on the Indian economy. Increased investment by the government in housing and infrastructure is very desirable. Increase investment results in jobs, business activity and increased purchasing power. The Chinese model has seen very high capital investment levels in the last two decades (45% of GDP was invested as capital in 2015).

Smart or dumb, the naming hardly matters. The conversion of the proposed funds into 'real work' on the ground will have some positive impact. It is estimated that roughly 7% of all approved projects have started. Progress is still early stages, so we eagerly await the benefits of a 'smarter' India.

This column is authored by Nitin Gregory. Nitin, who graduated from IIM-Calcutta, is currently pursuing a finance role with an automotive major. He has a deep interest in Macroeconomics and pens a blog at Gregonomics.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "Smart(ing) Cities". Click here!


More Views on News

Two Meetings That Nailed the Idea of Owning Brilliant Smallcaps Without Buying Them (The 5 Minute Wrapup)

Mar 22, 2018

Certain blue chips hold the potential of delivering returns comparable to small-cap stocks. With these stocks, you can get the best of both worlds.

What They Forgot to Tell You About Sensex at One Lakh (Profit Hunter)

Nov 29, 2017

Stocks that could beat Sensex returns in the long term.

Is Your Bank Gambling With Your Money? These Banks Should be Declared Dangerous... (Profit Hunter)

Jul 17, 2018

Tanushree Banerjee bets you would not want to leave your money with these unsafe banks...

Your Rescue Plan from the Cave of Poor Quality Stocks (The 5 Minute Wrapup)

Jul 17, 2018

And there will be no getting trapped with Amtek, Vakrangee, or Manpasand like stocks.

2019 Lok Sabha Elections and the Perils of Populism (Vivek Kaul's Diary)

Jul 17, 2018

Evidence from around the world shows that populism can only lead to more populism and this is clearly not good news for the Indian economy.

More Views on News

Most Popular

The Real Truth About India's FDI, Beyond WhatsApp(Vivek Kaul's Diary)

Jul 4, 2018

The FDI numbers do not look very impressive once we adjust for repatriations as well as the overall growth in the economy.

How to Avoid a 90% Loss Suffered by This Super Investor(The 5 Minute Wrapup)

Jul 12, 2018

Blindly following super investors is a dangerous game to play. Here's how you can avoid such mistakes.

The Answer to Your Wealth Worries: Small Caps (Especially Now)(Profit Hunter)

Jul 10, 2018

If you're worried about the markets - you are on the wrong track. This is opportunity - put your wealth-building hat on, instead - Richa shows you how...

New Fund Offer - ICICI Prudential Pharma Healthcare and Diagnostics Fund - Should You Invest?(Outside View)

Jul 6, 2018

ICICI AMC launches an open -ended equity fund following Pharma, Healthcare, Diagnostic and allied theme.

When Disappointment Panda is Around. Buy Quality Stock like This!(Chart Of The Day)

Jul 6, 2018

Buy Companies that can fight all kinds of Pandas and Bears in the long run.


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Jul 17, 2018 (Close)