Mumbai Political Economy of Rent Sharing

Urban governance is a complex and multifaceted phenomenon that varies significantly across different cities. In Mumbai, one of the most densely populated and economically vibrant cities in India, urban governance can be understood through the lens of a rent-sharing system. This system is fundamentally based on control over urban space and the generation and distribution of rents. The concept of “rent” here is used in the economic sense, referring to returns that exceed what would be available in a competitive market. This paper aims to provide a detailed conceptual account of how rent sharing operates in Mumbai, its functional aspects, and its implications for transformative change.

Rent sharing in Mumbai is a system where various stakeholders, including government officials, politicians, and informal economic actors, participate in the generation and distribution of rents. These rents are derived from the control and use of urban space. Formal rules and policies, which are often “flexibly” enforced, form the underlying basis for rent creation. This flexibility allows for the emergence of rents in areas where formal markets either do not exist or are not fully functional. For instance, the use of pavements for street vending, an activity that is technically illegal but widely practiced, generates rents for those who control access to these spaces.

Despite its association with corruption and patronage, the rent-sharing system in Mumbai serves several functional purposes. It provides a measure of stability and predictability in an uncertain legal environment, which is crucial for the functioning of the city’s economy. Many transactions in Mumbai’s economy are informal, and the rent-sharing system helps address commitment problems in these transactions. For example, street vendors who pay rents to local authorities or informal intermediaries can expect a degree of protection and predictability in their operations.

The rent-sharing system extends to various informal markets in Mumbai. These markets, such as street vending, informal housing, and small-scale manufacturing, are essential for the livelihoods of a large portion of the city’s population. In these markets, rents are generated through the control of access to resources and spaces. For instance, local authorities or informal intermediaries may charge rents for the use of public spaces for vending or for access to informal housing. This system, while not ideal, provides a degree of organization and predictability that allows these informal markets to function.

Formal institutions play a crucial role in the rent-sharing system. They provide the legal and regulatory framework within which rents are generated and distributed. While formal rules and policies are often “flexibly” enforced, they still form the basis for the system’s operation. For example, zoning regulations and building codes may be selectively enforced to generate rents for those who control access to urban space. This selective enforcement allows for the emergence of informal markets and the generation of rents.

While the rent-sharing system is functional and resilient, it also poses significant challenges for transformative change. The system’s reliance on rents and the control of urban space creates a vested interest in maintaining the status quo. This vested interest can thwart efforts to implement policies aimed at transformative change, such as large-scale urban redevelopment or the regularization of informal markets. As a result, while the rent-sharing system provides stability and predictability, it also limits the potential for significant improvements in urban governance and economic development.

The rent-sharing system in Mumbai is a complex and multifaceted phenomenon that plays a crucial role in the city’s urban governance. While it provides stability and predictability in an uncertain legal environment, it also poses significant challenges for transformative change. Understanding the dynamics of rent sharing is essential for developing policies aimed at improving urban governance and economic development in Mumbai.

For further reading on the topic of rent sharing and urban governance in Mumbai, the following links are recommended: