LOCAL ECONOMIC DEVELOPMENT STRATEGY FOR SUSTAINABLE URBAN DEVELOPMENT IN INDIA by Narayanan Edadan, PhD
Evolving LED Approaches
The role of urban local bodies in promoting local economic development (LED) has changed over the years. While in most countries, the LED approach has focused initially on attracting private investments through fiscal and financial incentives, during the 80s, the LED approach took varied forms ranging from the public sector led Local Enterprises Boards as in the UK, establishing Local Economic Development Authorities as in Aden and Singapore, and to public private partnerships in urban renewal, city improvement projects, mega urban infrastructure projects, etc in various mega cities across the world for improving the economic externalities for urban investments. In most cases, the LED approaches used the vision making and city competitiveness assessment strategies to identify core investment sectors for boosting the local economies. An important outcome from the evolving LED thinking is the recognition that fiscal and functional autonomies of urban local governments are critical for promoting urban economic development and that economic development cannot be achieved without an effective and sustainable institutional framework which enables local governments to formulate contextually relevant economic development strategies. The institutional limitations of urban local bodies/municipalities to design effective LED strategies have been a serious constraint in some countries.
During the past decade there has been shift in the concept of local economic development and some of these new perspectives are important in the context of India while designing appropriate LED strategies to promote economic growth and poverty reduction. The emerging discipline of ‘new institutionalism’, which breaks down the distinction between economy and society, is increasingly influencing the conceptual framework for designing LED strategies. Due to the institutional limitations of local governments to build income capital, human capital and urban economic growth relationships, there is a growing perception that local economic development should be built on the shared values, norms, rules and procedures of formal and informal institutions of the society, this calls for a change management approach in urban development process. Influenced by these social capital/ networking perspectives, contemporary LED framework deals with: the role of the cities within multiple, complex economic networks; the role of institutions in supporting economic development and the importance of strengthening these institutions; the role of ‘hard infrastructure’ provided by new technologies, and the ‘soft infrastructure’ of social networks; the mix between co-operation and competition that is required to support development; the importance of knowledge transfer and innovation; and, the need for sustainable and inclusive urban growth2. Many of these themes come together in the idea of ‘economic clustering’, which has received a remarkable degree of attention in recent years.
Although, the 74th Constitutional Amendments (74CA) in India has enabled urban local governments to establish partnerships with private enterprises and local communities for promoting the local development, the enabling provisions of the amendment has not been utilized imaginatively by most urban governments due to inadequate fiscal and functional devolution, poor fiscal health, and an institutional framework for building efficient investment partnerships with private sector and local communities. The role of urban local governments in alleviating poverty becomes more daunting due to the absence of an effective locally managed transmission mechanism between urban economic development and poverty reduction.
The over dependency of the local governments on the State and Central Governments to conceptualize and implement urban economic development and poverty reduction programs leaves the urban local governments as bystanders in this very important process. Past experience in LED strategies to promote urban economic development and poverty reduction initiatives suggests that the asset vulnerability of urban local governments/municipalities represented through the “income capital”, “human capital”, “social capital”, and
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