India’s cities mission a smart earner for private firms

India’s rapid development needs help, but are the consultants value for money or just cashing in on another big project?

It is monsoon season in India. This means heavy rains and as the climate crisis accelerates it can also mean disasters like landslides and floods.

It’s been no different in 2023. Indian cities, including the capital New Delhi, the financial centre Mumbai, and the tech centre Bangalore, among others, have been inundated and paralysed by the weather.

Indian cities already face significant problems, from a lack of infrastructure and resources to broad inequities on how local governments with limited funds and even less capacity react to disparities and environmental threats.

As part of this, the Indian government announced in 2015 a slew of policies that focused on urban development, rejuvenation and infrastructure.

The Smart Cities Mission was one of these policies that aimed to embed 100 Indian cities with digital technologies and interventions, capable of collecting and analysing vast amounts of data for governance, planning, and, perhaps in the future, monetisation.

The estimated value of these smart projects, across all cities, is a little over USD$22 billion. While the mission was to be completed in five years it has since been extended to 2024.

When Prime Minister Narendra Modi announced the Smart Cities Mission, he promised bottom-up development, improved quality of life especially for the urban poor, and innovative uses of technology.

While there was some excitement regarding the mission, there was also some trepidation given its similarities to previous urban policies and the scope for privatised development.

The rains are a reminder that while cities grow, the way they are planned is rarely inclusive or sustainable.

India’s urban population is exploding. By 2030 approximately 40 percent of India’s population will be urban meaning these issues will become more widespread and the need to fix them becomes urgent.

One of the ways in which the government has addressed this is by calling in the consultants. These companies, represented by McKinsey and the ‘Big Four’ accounting firms (Ernst & Young, Deloitte, PwC and KPMG), started to work with Indian governments in the 1990s.

Much of this was stipulated by international organisations and funding agencies like the UN and World Bank. This was seen as a way to both improve the efficiency of governments – which could learn from these private sector actors – and to ensure the efficacy of these large projects.

At the time, governments across the world were increasingly depending on consultants for project advice and implementation not only as a way to speed up government projects, but also as a way to reduce the size of public institutions.

The importance of fixing urban issues has grown in lockstep with liberalisation and globalisation since the 1990s. Cities in India have become ‘engines of growth’ with increased urban productivity leading to significant increases in the country’s GDP.

According to a 2018 World Bank analysis, India’s economy was growing at an annual average of more than 7 percent since the early 2000s compared to 4.4 percent in the 1970s-80s.

The smart cities project is part of a global trend of building smart cities and borrows from smart interventions introduced in other countries.

Interestingly, the private sector, specifically technology firms and management consulting firms, have played a significant role in the conceptualisation, spread, and implementation of the smart city concept.

The design of the policy itself was heavily influenced by consulting firms.

One official who has been involved in the Smart Cities Mission since the planning stage told researchers that ‘smartness’ in the Indian context was defined by, and the mission was largely designed by, many of these firms.

More than 50 firms, including consulting businesses and technology firms, were invited to present their views on what a smart city is and what the aims of a smart city policy should be. The Smart Cities Mission guidelines incorporated ideas from these presentations and built on these approaches.

Subsequently, the guidelines actually required city governments to engage consultant’s services to plan their interventions and the financial distribution across smart city projects. It was thought that local authorities did not have the capacity or know-how when it comes to smart city development and therefore external expertise was necessary.

As one management consultant told researchers: “Many times within government there might not be the skillset. It’s very technical. I am not saying that government officials don’t have or a government official might not have that skill but you need a group of people.

“So it makes sense for the government to bring in the private sector who bring in the best of know-how and knowledge, and also the best practices from around the world.”

While the dependence on private expertise follows a pattern similar to the privatisation of urban services in general, this shift in policy design and decision-making raises a number of questions about the state of local democracies and the future of urban governance as their partnerships with external consulting services grows.

Matthias Kipping argues that we are currently in the ‘third wave’ of consultant-government relationship that ‘started in the 1950s and surged since the 1990s’. This trend began in the US, followed by the UK and soon spread to countries like Canada, Germany, France and Australia.

In the US, consultants worked closely with the military before becoming more permanent fixtures in other parts of government. Dennis Saint-Martin wrote in 1998 that in countries like the UK, Canada, and France, consultants were first employed to improve administrative processes.

They have since played a part in strategising responses to climate change in Australia, municipal performance and benchmarking in Canada, and pandemic response in the UK — among a host of other examples.

Prior to the launch of the Smart Cities Mission, McKinsey had already influenced urban policy in India in the form of the ‘Vision Mumbai’ plan, parts of which were scaled up to a national-level policy.

Vision Mumbai was accused of squeezing poor people out of their homes, and considered a disaster for its inability to stand up to public scrutiny.

Within the Smart Cities Mission project, researchers have interviewed consultants and government officials working at the federal and local levels in order to better understand what consultants bring to the table and whether they are becoming an increasingly integral part of the policy process.

They found consultants play a variety of roles from advising and strategising to project management to training and capacity building of government officials and departments.

When it comes to the use of digital technologies and data analysis in particular, there is an assumption that government officials do not have the knowledge, skills, or imagination to use these tools for governance.

This assumption has always been closely linked with the involvement of management consultants in the public sector who are invited to guide governments on newer interventions and help update their skill sets.

The most common justification for why governments engage consulting firms is their expertise.

Given India’s relatively closed bureaucracy, this may not always be possible or easy for governments. Critics have, however, questioned this expertise. Some argue that consultants’ presence in government projects or policies is merely assumed.

This allows consultants to expand their work in the public sector, thereby gathering more experience and eventually becoming more familiar with government systems and processes.

Interestingly, consultants claim that they often tap into their existing knowledge networks to hone this know-how. A team working on smart cities in India might build on knowledge from another team from the same firm that has worked on smart cities in Spain for instance.

When asked about conflicts of interest, however, consulting firms often insist that there is limited exchange of information within the firm and that different departments and different branches work as separate entities.

On the other hand, consulting firms present their global and local knowledge networks as an advantage and claim that they are in a position to offer viable solutions precisely because of these networks they have access to.

Not only is this contradictory, but internal communications, whether formal or informal, are difficult to oversee or regulate.

Where many preach about efficiency, another common justification, from within the private sector, it is usually used synonymously with speed in decision making. The efficacy of this is difficult to evaluate or benchmark and it often stems from the assumption that governments are lethargic and slow.

While efficiency is desirable, it should not come at the cost of inclusive decision making or democratic processes.

Government organisations do not have the same purpose as private firms and it is therefore problematic to mould them in the image of these firms.

Governments have a responsibility to citizens and are not expected to turn a profit. Private firms are driven by a profit motive and have a responsibility towards their shareholders.

The other two related justifications are capacity in and of government, and taking responsibility.

Both the civil service representatives and consultants argue that governments have limited capacity especially when it comes to aspects of digital technology and data-led governance.

According to some consultants, this also allows governments to deflect blame onto these so-called experts if things do not go to plan.

Government employees told researchers that despite these advantages, not everything is smooth sailing.

For government employees, there has been some disillusionment not only with actual expertise but also with the high turnover of consultants which often results in the loss of institutional memory when they leave, then in re-engaging new consultants on the same project.

Some government representatives felt that while senior consultants make pitches and attend preliminary meetings they do not remain as involved for the duration of the project.

Further, the profile of bureaucrats is changing and increasingly they are leading ideation while consultants implement these interventions as project managers.

Consultants interviewed do not share this view and argue that they have not only been instrumental in every aspect of the policy but also that the mission required their presence.

The question is, are Indian cities smarter because of these consultants? Or is the question really whether smartness, as defined by the same private sector actors, the measure by which cities should be planned and developed?

Even if the answer is yes, the lack of transparency and accountability is worrying. This continued dependence on consultants weakens governance structures and, potentially, democracies.

While government officials are aware of these complexities both government officials and consultants are fairly sure that consultant involvement will continue in the foreseeable future. It is also true that hiring consultants could be beneficial.

The question then is how should we regulate these consultant-government relationships to ensure accountability and transparency?

Such regulation could protect from vague or undisclosed contracts, could ensure the best value for public money, and could allow for greater public scrutiny, all crucial elements to the democratic process.

Uttara Purandare is a PhD Researcher in Public Policy at the IITB-Monash Research Academy. 

Originally published under Creative Commons by 360info™.