#19: Planning for Uncertainty
The current form of urban planning fails at the basics
Delhi faces a two-sided housing problem. On the one hand, home prices in Delhi are out of reach for most Delhiites, and one-third of Delhi’s population lives in slums (Delhi Development Authority, 2023a). On the other hand, Delhi has many unsold and unoccupied homes built at public expenditure and offered below cost (The Economics Times, 2023). Delhi simultaneously suffers from a problem of plenty and shortage (Mint, 2022; Scroll, 2017).
This mismatch is not due to the lack of planning, power, or money. Since 1962, Delhi has witnessed four master plans developed by a single dedicated government agency. Delhi has been a planned city with most of its land controlled by the Delhi Development Authority (DDA), a government monopoly. The power to enforce the master plans comes from the Delhi Development Act 1957. This law empowers the DDA (S.7) to plan the city and force every citizen to follow such plans. The Act (S.15) also permits the agency to acquire and develop any land in any way they deem necessary (The Delhi Development Act, 1957). Money is also not a constraint for Delhi as the DDA had an estimated budget of Rs. 7,643 crores for 2023-24 and Rs. 22,915 crores as reserves (Delhi Development Authority, 2023b).
If planning, power, and money do not explain the dichotomy of surplus and shortage, what does? This article shows how Delhi’s planning authority fails at the preliminary task of predicting the future population and how Delhi’s planning approach may cause the problem. This failure indicates that Delhi probably needs to move from a planning model to a responsive one.
Predicting Delhi’s population
Delhi’s approach to urban development requires the planning agency to project population deep into the future. This is because of two reasons– first, the master plans are usually made for 20 years, and second, the plan is implemented by a government monopoly. Since plans are 20 years into the future, the planning agency must envision the population for the plan period. The second need for prediction is that Delhi’s urban landscape is largely developed by DDA, a government monopoly that has no feedback mechanism like private entities. Private developers continuously face the market tests of price and profits that shape their actions. However, a government monopoly controls prices and has no need to make profits. Instead, the government monopoly executes a plan based on the projected population of Delhi. All of Delhi’s master plans have a population projection within the first ten pages.
Though population projection is critical to Delhi’s urban planning, the DDA has always failed to predict Delhi’s population growth, since 1962. As the table below shows, for the first two master plans, the DDA underestimated the population of Delhi. In the last master plan, the DDA overestimated the population growth of Delhi. The first master plan of 1962 underestimated the population by 11.3% while the second master plan published in 1990 underestimated by 7.3%. However, the master plan published in 2007 overestimated the population of Delhi in 2011 by 8.9%. There has also been a significant gap between each master plan.
Not only has the DDA failed to predict Delhi’s population accurately, but the error rate per year has been increasing over time. The projection has also both underestimated and overestimated the population over the years. One would expect the planners to be better placed to predict the future population with better technology and more state capacity. However, the error rate per year for estimating population has only increased in the Delhi master plan since its inception. The first plan had an error rate per year of -0.59% while estimating the population 20 years into the future. For the next master plan in 1990, the error rate per year was -3.41%, though the projection was for the following year. The authorities estimated the population only four years into the future in 2007, but the error rate per year increased to 2.25%.
Consequence of prediction
The Delhi Development Authority’s prediction error would not have been an issue in a free-market economy because private players would have a far more sensitive information system—prices and profits. Instead of the monolithic DDA, housing in Delhi would be built by thousands of developers of different sizes. Each private sector developer would see the response to housing over a short period, say two years, as opposed to the multi-decade plans. Demand from residents would constantly drive developers in the right direction. Private developers who made mistakes would learn from the costly mistakes or go out of business.
In contrast, DDA’s estimation errors have enormous costs in the monopoly-run and centrally planned system of Delhi. A significant amount of housing in Delhi is built by a government entity that gets no feedback from the market. Central planning depends on ignoring the price mechanism and depending on calculations/estimations by the leviathan. Once the plan is set, the leviathan trundles along till the end of the plan period, and targets are met, irrespective of the outcomes.
One example of the leviathan ignoring the market is Narela. Since the first master plan in 1962, DDA has been predicting that Narela will become a growth centre. The plan noted that Narela has:
“underground water... wholesale markets... a flourishing manufacturing industry of Persian wheels and agricultural equipment,... large oil crushing mills and the products thereof sold all over India.”
Since then, DDA has invested in developing Narela, ignoring that the residents of Delhi do not seem to want to live there. Since 2010, Narela has almost 40,000 unsold apartments built using public funds of around Rs.15,000 crore (The Indian Express, 2023).
Central Planning and Urban Planning
Delhi’s urban planning is similar to the central planning of the economy. In central planning, the planner anticipates what would be required deep into the future and goes about trying to manifest the same. India’s five-year plans would predict the amount of steel India would need at the end of five years and plan the industries the economy would have. Similarly, Delhi’s urban plans predict the population of Delhi, twenty years in the future and also the type of industries that will operate in the region. An interesting example is seen in Delhi’s first urban plan. This plan predicted that Narela would grow into an industrial town where Persian wheels, a type of irrigation equipment would be manufactured.
In addition to plans, centrally planned economies are characterised by government monopolies. Before 1991, India took an approach where the state would be at the commanding heights of critical industries like steel and coal, and the private sector would be left to do marginal stuff like software development. Similarly, Delhi has a commanding heights state monopoly– the Delhi Development Authority. This authority is supposed to construct new housing, business centres, parks, and most other private and public places. At the margin, some private developers are supposed to be tolerated.
The outcomes of central planning are similar to the outcomes of urban planning. Centrally planned economies usually suffer from chronic shortages of some goods and overproduction of others. Indians would have to wait sometimes up to a decade to get a telephone connection or one of the two models of consumer cars available. Similarly, people in Delhi wait decades in the hope that their name will come up in a DDA lottery (Hindustan Times, 2016; NDTV, 2014). In addition to a chronic shortage of goods, a centrally planned economy overproduces some things. For example, wheat and rice production is centrally controlled using features such as support prices, subsidies, and production quotas. As a result, the overall food stock by the Food Corporation of India reached 680 lakh tons in 2024 while the necessary stock was 214 lakh tons (The Indian Express, 2024). Similarly, DDA has had 40,000 unsold flats since 2010 (The Indian Express, 2023).
When a centrally planned economy finally produces goods or services, they are usually of poor quality. HMT, a relic of central planning, was famous for its poor-quality watches. Similarly, residents of DDA flats in Anand Vihar face acute water shortage and the water available is dirty and not potable (The Quint, 2022).
Response to central planning
Citizens respond to a centrally planned economy in two ways: either they resort to the black market or they migrate out. For example, India had a black market for cement worth about Rs. 7.85 billion during 1961-82 (Shyam J Kamath, 1990). This was a time when the Indian cement industry was characterised by centrally planned comprehensive control on both price and quality. This entire black market disappeared once the cement industry was de-regularised in 1989. Similarly, Delhi’s urban landscape has many buildings that have been illegally constructed (Live Law, 2024). Buildings are extended beyond the dimensions that government rules allow; buildings are often used for purposes other than those in Delhi’s master plan. In some areas, buildings have been constructed in places reserved for parks and forests in the government plan. This illegal construction of Delhi can be characterised as the black market of Delhi’s urbanscape.
In addition to a black market, the other response to centrally planned economies is exodus. People simply leave the centrally planned economy for the greener pastures of the free market. The centrally planned East German economy saw people leaving in hordes for the free markets of West Germany (Corey Ross, 2002). The problem became so acute that East Germany had to build the famous Berlin Wall.
Similar to East Germany, Delhi witnesses an exodus to Gurgaon. This is especially ironic, considering Delhi’s central planners saw no future in Gurgaon. Delhi’s first master plan had this to say about Gurgaon:
“This district town in Punjab is handicapped for want of good water sources and only a modest growth is anticipated”.
In the period 2001- 2011, Gurgaon’s population growth was 74% while Delhi’s was only 21%.
The inability to predict the future is not an issue of the authorities making the plans or the lack of information. The master plans in their current form try to anticipate the future including the population growth and the kind of houses and infrastructure they need. Human life and daily market mechanisms are too complex to make any such accurate predictions. The heavy intervention by the planning authority has only distorted the market for land and has underprovided public goods (xKDR, 2024).
The population of a city is highly dynamic and is dependent on various economic and social factors. It is not possible to plan a city in such a long term but only provide a framework affecting the supply and demand for land and floor space. Experts such as Dr Bimal Patel suggest that urban planning should move away from “designing the cities” to creating an environment which enables their growth (LiveMint, 2015).
References
Corey Ross. (2002). Before the wall: East Germans, Communist authority, and the mass exodus to the west. The Historical Journal, Cambridge University Press, 55(2). https://doi.org/10.1017/S0018246X02002467
Delhi Development Authority. (2023a). Chapter 14—Economic Survey of Delhi 2022-23. Delhi Development Authority. https://delhiplanning.delhi.gov.in/sites/default/files/Planning/ch._14_housing_and_urban_development.pdf
Delhi Development Authority. (2023b). Delhi Development Authority Expenditure Receipts. Delhi Development Authority. https://dda.gov.in/sites/default/files/Accounts/expenditure03072023.pdf
Delhi Master Plan 1962. (1962). Delhi Development Authority. https://dda.gov.in/sites/default/files/inline-files/MPD-1962_text_report.pdf
Draft Master Plan for Delhi-2041. (2023). Delhi Development Authority. https://dda.gov.in/sites/default/files/inline-files/Draft%20MPD%202041%20%28English%2909062021_compressed_0.pdf
Hindustan Times. (2016, March 5). Thirty years later, 17,000 people are still waiting for DDA flats. Hindustan Times. https://www.hindustantimes.com/delhi/thirty-years-later-17-000-people-still-waiting-for-dda-flats/story-wPpcoposjGaE5jAoOkVZsN.html
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LiveMint. (2015, January 14). How to make urban planning work. LiveMint. https://www.livemint.com/Politics/NBu03YnZHcRSC8r47M1VPN/Bimal-Patel--How-to-make-urban-planning-work.html
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Mint. (2022, November 17). Delhi-NCR sees highest increase in housing price aross India. Mint. https://www.livemint.com/news/india/delhincr-sees-highest-increase-in-housing-price-across-india-report-11668577786632.html
NDTV. (2014, February 1). Delhi: 30 years and waiting, protestors ask DDA why plots have’t been allotted. NDTV. https://www.ndtv.com/delhi-news/delhi-30-years-and-waiting-protestors-ask-dda-why-plots-havet-been-allotted-549455
Scroll. (2017, May 11). Housing paradox: Despite a severe shortage, 12% of houses in Indian cities are lying vacant. Scroll. https://scroll.in/article/836589/housing-paradox-despite-a-severe-shortage-12-of-houses-in-indian-cities-are-lying-vacant
Shyam J Kamath. (1990). Estimates of the black market in cement in India, 1961–82. Atlantic Economic Journal, 18(85). https://doi.org/10.1007/BF02316943
The Delhi Development Act (1957). https://mohua.gov.in/upload/uploadfiles/files/Delhi_Act_1957.pdf
The Economics Times. (2023, January 13). In a first, Delhi Development Authority sells CWG Village flats at 30% discount. The Economics Times. https://economictimes.indiatimes.com/industry/services/property-/-cstruction/in-a-first-dda-sells-cwg-village-flats-at-30-discount/articleshow/73220238.cms?from=mdr
The Indian Express. (2023, December 25). 40,000 flats empty, unsold: Why the DDA’s Narela project has struggled to take off. The Indian Express. https://indianexpress.com/article/cities/delhi/delhi-development-authority-dda-narela-project-dda-flat-middle-income-group-flats-9080633/
The Indian Express. (2024, January 18). Wheat stocks above buffer but plunge to a 7-year low. The Indian Express. https://indianexpress.com/article/india/wheat-stocks-above-buffer-but-plunge-to-a-7-yr-low-9114706/
The Quint. (2022, April 5). Only 10 Minutes of Water a Day: Harsh Reality of Life in East Delhi’s DDA Flats. The Quint. https://www.thequint.com/my-report/only-10-minutes-of-water-every-day-the-harsh-reality-of-life-in-east-delhis-dda-flats
xKDR (Director). (2024, February 4). Big ideas Ep 01 Dr. K.P Krishnan, Reimagining urban planning from an economic perspective in India.
Bhuvana Anand, Shubho Roy, and Anandhakrishnan S are researchers at Prosperiti.