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Smart cities In India have the 3rd highest allocation among urban ministry schemes

About 31 per cent of India’s population lives in urban areas contributing to 63 per cent of India’s GDP. By 2030, 40% of India’s population is expected to dwell on urban areas contributing to 75 per cent of GDP. This requires the development of cities to enhance the quality of life of citizens.

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Definition / Scope

Smart city refers to the use of information and communication technologies (ICT) to enhance the operational efficiency and improve quality of government services in a city. With the use of ICT, cost is reduced, resource is consumed less, quality is enhanced, and contact between citizens and government is increased. Smart solutions are used to give decent quality of life to people residing in those cities by connecting physical devices to the internet.

Smart city includes the below core infrastructure elements:

  • Sufficient water supply
  • Fail safe electricity supply
  • Efficient sanitation including solid waste management
  • Strong IT connectivity and digitisation
  • Sustainable environment
  • Health and education cover for all
  • Affordable housing for the poor
  • Well-organized urban mobility and public transport
  • Security of women, children and elderly people

Market Overview

  • India has come up with Smart City Mission which is an urban renewal program by the Government of India to develop 100 cities across the country making them citizen and environment friendly.
  • Smart Cities Mission was led by Prime Minister of India, Narendra Modi on 25 June, 2015.
  • 100 cities with a population of 99,630,069 have been selected by the Smart Cities Mission.
  • The smart city mission aims to enhance the quality of life of its people while prioritizing environment sustainability.
  • Cities are selected on the basis of nomination of at least one city by Indian States and Union territories in their region.
  • Financial aid will to be provided to cities between 2017 and 2022 after which results will be seen from 2022.
  • For each selected city, a SPV has been created headed by full time CEO, which will plan, appraise, manage, implement, operate and monitor the projects.
  • Centre and state government will arrange for USD 140 million funding to the company while additional amount should be raised from financial market.
  • Currently there are 2,855 projects worth USD 19 billion and 147 projects worth USD 267 million.
  • The Mission aims to impact around 100 million out of the India’s 1.25 billion citizens.
Smart solutions.PNG

Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet

Market Risks

  • Smart cities and electronic linkages can lead to cyber attacks and security risks in India. The use of entire ipv4 bandwidth may lead to cell overload if technologies that are used to digitize infrastructure exceeds the network that supported them. Similarly, the reliance on large control system might have impact on disruption.
  • India ranked 183rd among 189 countries obtaining construction permits. As the Smart cities mission has duration of only four years, the delay in approvals and three tier governance structure might affect the project badly.
  • With the use of Artificial Intelligence in smart cities, the jobs of people is expected to be replaced by AI.

Top Market Opportunities

  • In India, 31 per cent of the population resides in cities contributing to 63 per cent of GDP. It is expected that by 2030, 40 per cent of people will live in cities contributing to 75 per cent of GDP. Further, it is estimated that by 2030 there will be more than 40 per cent increase in urban disposable income.
  • Out of the selected smart cities, 24 are business and industry centres, 18 are cultural and tourist centres and 3 are education and healthcare hubs.
  • Huge amount of capital will be spent on infrastructure development such as rails, roads, airports, bridges, and real estate such as education, health, hospitals, offices, etc. Further, this will create demand for across different sector such as metals, mining, paints, furniture, ceramics, electronic goods and others. 50 per cent of the proposed capital investment will be spent on smart city projects such as intelligent traffic management, urban redevelopment and housing, public transport, waterfront development and row design.
  • Assuming that 10 to 15 per cent of each smart city project has ICT component, smart cities can create around USD 30 to 40 billion business opportunity for IT sector.
  • Job opportunities will be created for people in different sector. White collar jobs as IT professionals, data analytics, programming and high-ending consulting will be required in huge number.
  • India will have 109 digitally connected smarted cities by 2020. For this, USD 19 billion will be invested for Digital India Initiative.

Industry Challenges

  • Financing Smart Cities: The first and foremost challenge in Smart city mission is to channel finance to smart cities. With in a span of 20 years, USD 101.52 billion is required which means annual requirement of USD 5.07 billion. The challenge will be on the financing of these projects as majority of the project would require complete private investment or PPP.
  • Retrofitting existing legacy city infrastructure: When reviewing smart city strategy, number of issued must be considered. Determining the existing city's weak areas that need the utmost consideration is the biggest challenge. Further, the integration of earlier separated legacy system to achieve city wide efficiencies can be major hurdle.
  • Availability of Master Plan: Most of the cities in India do not have their master plans. Around 70 to 80 per cent of the cities lack master plan. Further, not all the cities selected for the mission are at equal level of development. Some cities already have better infrastructure and investment model.
  • Co-ordination: The delay in making approvals and clearances by the government of India would be another hurdle for smart cities mission as the project is time bound.Smart cities mission can only be fulfilled if central government, local government, regulatory institutions and private bodies work together. However, bringing all these bodies to work together is easier said than done as they have their own style of working.
  • Shortage of skilled manpower: In order to make smart cities mission implemented, not only large workforce is required but also skilled and trained workforce. Government has allocated only 5 per cent of the total budget for training the workforce. This is inadequate considering the scale of smart cities mission.

Pricing Trends


  • Each city will be given USD 14.4 million per year for the five years. (2015-2020)
  • Additional fund is expected to be raised through municipal bonds, debt from financial institutions, user charges, FFC recommendations, borrowings from bilateral and multilaterals, National Investment and Infrastructure Fund and Public Private Partnerships (PPP).
Contribution to proposed investment.PNG

Regulatory Trends

  • The approval of the Smart Cities Mission will done by an apex committee, headed by the Secretary, MoUD and representative of related Ministries. The apex committee will consist of the following members:
    • Secretary, Housing and Poverty Alleviation
    • Secretary (Expenditure)
    • Joint Secretary, Finance MoUD
    • Director, NIUA
    • Chief Planner, Town and Country Planning
    • Select Principal Secretaries of States
    • Select CEOs of SPVs
    • Mission Director
  • National Mission Director will be responsible for the over all in charge of all activities related to the mission.
  • A State level High Powered Steering Committee (HPSC) chaired by the Chief Secretary, would be responsible for directing the mission programme on its own. The HPSC will consist of the following members:
    • Principal Secretary, Finance
    • Principal Secretary, Planning
    • Principal Secretary/Director, Town & Country Planning Department, State/UT governments
    • Representative of MoUD
    • Select CEO of SPV in the state
    • Select Mayors and Municipal Commissioners
    • Secretary, Public Health Engineering Department
    • Principal Secretary, Urban Development
  • A Smart city Advisory Forum will be established at the city level for all 100 smart cities to facilitate collaboration among stakeholders.
  • The SPV formed as a limited company will be governed by the Companies Act, 2013
Estimated budget.PNG

Other Key Market Trends

The strategic components of the Smart Cities Mission are retrofitting, redevelopment, greenfield and pan city initiative.

  • Retrofitting: It focuses on making existing areas more efficient and liveable. An area of more than 500 acres will be identified and depending upon the current level of infrastructure services, cities will prepare strategy to become smart.
  • Redevelopment: An area of more than 50 acres will be identified by ULBs and a new layout plan will be prepared with higher FSI, high ground coverage and mixed-land use.
  • Greenfield: Smart solutions will be introduced in vacant areas of more than 250 acres using plan implementation tools, plan financing and innovative planning.
  • Pan-city: Smart solutions will be implemented to the existing city-wide infrastructure to improve productivity and quality of life of citizens. Smart solutions will use technology, data and information to enhance services and infrastructure.
    • All the cities from West Bengal, Mumbai, Navi Mumbai from Maharashtra have withdrawn from the Smart Cities Mission. Mumbai withdrew from the challenge due to the Smart city guideline which may weaken the municipal body's hold on the mission. While West Bengal rejected the smart cities project with the aim of developing its own Green city project.

Market Size and Forecast

  • As on May 1, 1333 projects worth USD 7.23 billion had been either completed or in the implementation stage.
  • In order to develop the 100 smart cities and rejuvenation of 500 others, Indian Cabinet has approved US$ 14 billion. Out of this, USD 6.7 billion has been kept aside for Smart Cities Mission and USD 7.0 billion for the Atal Mission for Rejuvenation and Urban Transformation.
  • Smart cities has the third highest allocation among urban ministry schemes, about 14.8 per cent.
Funds utilized percentage.PNGStatus update.PNG

Competitive Landscape

Selection Process

The cities compete for selection as a smart city in "City Challenge". There are 2 stages in the selection process.

Stage 1: Shortlisting of cities by states

The state shortlists the potential smart cities on the basis of earlier conditions and scoring criteria. In the first stage of the competition, cities will compete with each other on the basis of conditions precedent and scoring criteria. In order to succeed in the first the round of competition, all the conditions precedent will have to be met and the highest scoring cities will be shortlisted and headed for participation in the Stage 2 of the challenge.

Stage 2:

The potential 100 smart cities prepare their proposals for participation in the City Challenge. Each city's Smart City Proposal (SCP) is expected to have one of the model- retrofitting, greenfield development, redevelopment or pan city. Additionally, the SCP will include the consultation done with the stakeholders and residents and proposal for financing of the smart city plan.

After this proposal will be submitted to MoUD for all the 100 cities and evaluated by a committee which will include institutions, organization and national and international experts. MoUD will announce the winners of the first round of challenge. The winning cities will proceed to make their cities smart.

  • Based on All India competition, 20 cities were selected in Round 1 on January 2016. In May, 2016 in fast track round, 13 more cities were selected.
  • In Round 2, 27 smart cities were selected out of 63 participating smart cities in September 2016.
  • In Round 3, 30 smart cities were selected out of 45 participating smart cities in June 2017.
  • In Round 4, 9 smart cities were selected out of 15 participating smart cities in January 2018.

Key Market Players

Out of the 99 smart cities the 6 prioritized smart cities are - Bhubaneshwar, Ahmedabad, Surat, Kochi, Pune and Indore.


Bhubaneshwar submitted its proposal in 3 major categories which were:

  • Area based Development in an area of 985 acres selected as Bhubaneswar Town Centre District
  • Social Equity and Capacity Building projects in the selected BTCD area.
  • Development of Intelligent City Operations and Management Centre as the Pan city Technological intervention


Ahmedabad submitted its proposal in the following categories:

  • Area based Development in an area of 590 acres situated in Wadaj region near the Gandhi Ashram.
  • Retrofitting - 515 acres of transit oriented zone in Wada
  • Redevelopment - 75 acres of Wada Slum
  • Two projects taken up as Pan city proposal are smart transit-integrated transit management platform with common card payment system and Command Control Centre with OFC network.


Surat submitted its proposal in the following categories:

  • Area based Development: Retrofitting is selected for 112.28 sq. km area of Surat city.
  • PAN city proposal based on Smart solutions for Transport Mobility Connectivity in entire city area.


Kochi submitted its proposal on the below categories:

  • Area based Solution: Retrofit transformation of 7 sq km of Fort Kochi-Mattancherry-Central City linked by waterway.
  • Pan city solution based on G2C services using Smart Card and mobile platforms
  • Pan city solution based on intelligent water management solutions.


  • Pune plans to invest in selected local area (Aundh-Baner-Balewadi) to transform liveability and match best in class global cities.
  • 19 ICT solutions in mobility and water has been identified.


  • The smart city proposal for Indore consists of Area-based Development, Pan-city solution and redevelopment area.
  • Area based development includes road development, intelligent transport system, walkability, 24*7 water supply, solid waste management, economy and employment.
  • Redevelopment of public land includes walkable community with slum-housing, affordable housing, shared parking, rooftop solar power plants generating 25 per cent of energy demand.

Strategic Conclusion

The urban population in India is growing rapidly from 27.8 per cent in 2001 to 31.2 per cent in 2011. Smart cities mission will be a strategy to overcome the challenges faced by people in urban cities.The aim of the mission is to create urban areas that focus on quality of life for citizens through the application of smart solutions. The Indian government and private sector are working together to achieve the smart cities mission.

Further Reading


  • GDP - Gross Domestic Product
  • ICT - Information and Communication Technology
  • SPV - Special Purpose Vehicle
  • ULB - Urban Local Bodies
  • USD - US Dollar

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