Growth “wallahs” (the Reserve Bank of India and the finance ministry) routinely underestimate the interlinked role of land, water and housing in development. In the Indian context, these are critical for a long term growth strategy. Our growth czars are disingenuous in routinely deriding the use of equity markets and foreign investment as valid indicators for economic health but are quick to play to only these two indicators for trumpeting economic health.

Sadly, our development vision remains limited to what foreign entities can do. This was illustrated by the recent call for the World Bank to ensure development finance for infrastructure. Contrast this with China, which confidently mooted the idea of an Asian Investment Bank at the recent Asia-Pacific economic cooperation (APEC) jamboree. Full marks to the Indian contingent for realism but are we really that helpless.

The view from North Block invariably focuses on the availability of finance as the key constraint. This sounds odd for a country growing at 5 percent, or thereabouts. Surely international investors should be interested, if we have a saleable project profile, to invest an additional US$75 billion a year taking us from under 2 percent to a total share of 7 percent in world FDI (close to our share in world GDP growth over the last decade) and from an investment ratio of 35 percent to closer to 40 percent with China at 48 percent.

Forget foreign investors. Why is it that large self-help groups, like Sahara, who reportedly raised Rs 240 billion from 30 million investors, don’t do anything productive with the money in India? The asset value of the top 20 Indian realty companies is around Rs 700 billion. In addition to this, Indian banks have made available Rs 1,500 billion to pump up the land and realty market. Currently, around 11 million apartments are lying empty and unused in the country. Why is the government then perpetuating this bubble by allowing foreign investments in the realty sector?

Here is where the importance of land, water and housing for the urban poor kicks in. All three are scarce resources and hence have become the source of huge rents for the state police. Let us take the case of housing. If you are a migrant into Delhi the cheapest urban land available illegally in a slum would be at around Rs 20,000 per square foot. In such a scenario, is it any wonder that the paved sidewalks of the capital are a better alternative despite the constant noise, pollution and danger from drunk drivers? Rent in urban slums is Rs 15 per square foot per month. A substantial portion accrues either as a lump sum or as an annuity to those who are supposed to implement the rule of law. This explains why nothing substantive is done to (a) control in-migration or (b) provide suitable transit or temporary housing at regulated rates for recent migrants and (c) suitable relocation into permanent homes. If incentives (tax rebates and cheap credit) are provided for realty, shouldn’t they also be provided to social entrepreneurs who provide these facilities?

Slums are crammed spaces where people are literally stuffed together with one person living in two square feet of land without any facilities for sanitation. Club this with the understandable preference of the newly migrated population for open defecation instead of using filthy public latrines which only adds to the dirt and leads to health problems. Rusted water pipes, passing through filth, with only intermittent water pressure to keep the filth out, shallow wells and the cohabitation of animals are the originators of the infamous “Delhi-belly”. If you set up an international hotel or health facility, the house-keeping staff will all come from a slum. Unless the management is very careful and delouses them daily, they will carry the bugs from their homes under their finger nails, in their shoes and into the shiny, sterilized exterior of their workplace. Welcome to an integrated and seamless world.

India has a per capita annual availability of around 1,500 cubic metres of water. We use only around 500 cubic meters which means that we wouldn’t face water stress anytime soon. The problem is the poor manner in which we use water and the skewed availability across regions. We do not, for instance, harness Arunachal Pradesh’s hydro power potential of 40,000 MW and instead just let all the excess water go waste. We fail to treat industrial effluents and sewage before directly discharging them into rivers. The Hindus amongst us, are not even able to encourage the use of crematoria and discourage the practice of burning our dead (around 85 million every year) on the banks of rivers.

We have even forgotten the Garland canal project of Rao and Dastur, proposed in 1972, when public investment was not a red rag. The idea then was to divert the surplus water from the eastern parts to the deficient areas in the south and west. The plan was an ambitious one and well beyond the financial capacity of the foreign multilateral and bilateral funders we are so reliant on, and so we buried it. We should take a leaf from China which is pursuing exactly a similar project to transfer surplus water from its southern areas to the north while choosing to ignore the “noise” opposing the move. Harvesting and pricing water appropriately is a must but this cannot be done at the cost of ignoring supply constraints.

Availability of land and simple registration norms is crucial for business. It is never clear why governments, who court new investors, do not first utilize land owned by the government for the purpose before resorting to acquiring privately owned land. After all, state action (even under the new land acquisition Act) is deemed to be in public interest and needs no justification. Once the governments land cache is exhausted, it can always renew it. Has anyone ever done an audit of land owned by government agencies against their foreseeable needs? I cannot find anything on the website of the comptroller and auditor general of India (CAG), though one is hampered by the absence of a “search” function on this otherwise informative website. The government’s functionality is frozen by its inability to take decisions within the existing regulations. Its latest strategy is to attack the messenger (the CAG) in a desperate last minute attempt to obviously, kick the ball elsewhere.

The PM shall shortly be on his way to China. One hopes that after the handshakes are done, photographs taken and the Mai Tais downed, his team would take the opportunity to talk about the north-south link canal, check how Beijing manages its migrants, view their waterways and reflect on China’s land use strategy. This may be more useful than signing a no-trespass protocol. Instead, invite China to develop a hydropower facility in Arunachal Pradesh, visit Varanasi and suggest ways to cleanse Ganga, whose magic has not waned yet. The dragon waiting to devour us is not in China, it lives in the gallis of Delhi.

This column first appeared in the author’s blog at http://ahlu-india.com/2013/10/18/mouldy-growth-fundamentals/