The finance minister and his government have two compulsions.
One is to generate employment on a war-footing. Given the normal population growth, India needs to create at least 10-15 million jobs annually. The five years of virtually no job creation has left the present government with unemployed hopefuls of at least 50 million.
One way of creating more jobs will be to accelerate the process of setting up manufacturing units. That would take two years. The other way is to focus on infrastructure. If highway construction is taken up, jobs at various levels will be created almost overnight.
But infrastructure creation costs money. That's precisely what the government does not have as the previous government had left the national coffers almost empty.
Hence the need for FDI (foreign direct investment).
Since almost 70% of India's current GDP comes from its cities (agriculture accounts for barely 13% of the GDP), the fastest way to spur GDP growth is to focus on new cities. Hence, the focus on 100 new cities.
Finance minister Arun Jaitley has also spoken about 16 new ports. There are reasons. Whenever tenders are called for privatising terminals, investor response is excellent. Moreover, almost every port operator has made money. Ports would, therefore, be a good way of creating port-cities as well.
By allowing private investment in new airports (on the public-private-partnership or PPP basis), the government will most probably allow ports, airports and the new cities complement each other. Each of these will require FDI, and the interdependence of these projects will only strengthen their commercial viability, individually.
Cities need houses and offices. Hence, the focus on low-cost housing. After all, a young population will need new houses and the best way to address this is to focus on new cities where the mafia's hold on land banks would be weaker.
This would translate into a slowing down of incremental population growth in cities like Mumbai and a rise in those of the new port- and airport-cities in the next five years.
This could also cool prices in India's metropolises, which will assist in coping with the inevitable urbanisation any developing economy must be prepared for.
These cities will need mass rapid transport systems. That's what's being planned for the 24 cities along the Delhi-Mumbai Industrial Corridor (DMIC).
The same model will be followed in the case of the remaining cities as well. The present government is doing all it can to get the dedicated freight corridor going (with Japanese investment). These corridors should have come up by 2017, but the previous government delayed the work, possibly because it did not want the benefits to go to Gujarat.
The 24 DMIC cities, the 16 port- and airport-cities will become nodes of development around which there will be highways and port-rail connectivity. Incidentally, port-rail connectivity is already allowed on a PPP basis. The new railway PPP norms will allow this scheme to get extended.
The new cities, along with existing ones, will open new markets for agricultural products. They will also be the centres which will demand soft urban infrastructure like schools, hospitals, playgrounds, waste management systems and transportation linkages and facilities.
That's why it's reasonable to assume that fresh incentives to continue the promotion of such cities will be offered by this government in successive years as well.