This post examines how a country can use a charter city to overcome the challenge of commitment in economic development. This challenge arises when governments cannot reliably commit to the long term security of investors and residents. In order to overcome this challenge, a country can charter a new city that leverages the institutional credibility of partner governments.

The challenge of consensus building, the focus of this post, arises when people attempt to improve the rules through collective agreement. Charter cities can complement efforts to reform by consensus, quickening progress toward the better rules that allow people to improve their lives.

The UN estimates that India’s urban population will grow by nearly 600 million in the next 40 years. The existing process of consensus building slows the pace of urbanization and deprives many poor rural residents of access to the social, educational, and economic benefits that can come from city life. Many of those who do migrate to cities will end up informally housed in dangerous slums where services are either not provided or obtained illegally. The people of India can use charter cities to let new urban areas emerge where the people can access formal economic opportunities and live within the law.

To accomplish this, India could use a method similar to the one that China used in establishing the special zone around Shenzhen — a city that in just 25 years grew from a tiny village into a metropolis of more than 10 million people. In so doing, India can take on all three of the national roles required for a charter city: guarantor, host, and source.