India needs to take advantage of the potential for urbanisation to unlock the growth that triggered its rival China, Nobel laureate Paul Romer said, adding that the future would be almost entirely urban.
The big question for India right now is how to get the momentum back on urbanisation, the former chief economist of the World Bank said while addressing global leaders at the NDTV World Summit 2024 in New Delhi on Monday. "Successful urbanisation was a very important key to the success in China. India needs to take advantage of the potential there."
Romer underscored that the challenge with urbanisation was the problem of land assembly. "If you can assemble (a) large parcel of land, you can take that land, which is worth very little, and turn it into land, which is phenomenally valuable by creating a modern city there."
The key location where most of the gross domestic product across the world gets produced is concentrated in urban centres, the Nobel Laureate said. "There are few things like agriculture and minerals that require resources of land, but all of the others are produced in cities."
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The future will be almost entirely urban, with over 90% of the population in urban centres, Romer said. "But you need to expand the total amount of floor space in urban areas to accommodate those people.... Every country in the world is facing the problem of expanding floor space."
The market cannot increase the supply, so demand goes up with price and supply does not respond. The reason for the supply to not respond is there are many levels of government now that stand in the way of someone who wants to build a new building, according to Romer.
What India needs to do is to figure out how to mobilise the people who own all the pieces of land and share gains to them, he said. "So, the economics of this is not hard but the politics are challenging. This is where leadership will make a difference."
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