Montek Ahluwalia bats for smaller states to drive economic growth

Ahluwalia added that creating newer cities in existing states is riddled with challenges that are both political and economic

Montek Singh Ahluwalia, economist and former deputy chairman of the erstwhile Planning Commission of India, has pitched for creation of new cities by carving out new states to drive urbanisation and fuel economic growth.

 

“We need more urbanisation and more cities and the focus should be to develop the Tier-II cities into near-metros,” he said at a fireside chat at the Karnataka Global Investors Summit 2025.

 

Pointing out to the regulations pertaining to land acquisitions that make it daunting to set up new cities, Ahluwalia said, “But with the creation of a new state, one has the urge and the ability to acquire those for public good.”

 

 

He further said that creating newer cities in existing states is riddled with challenges, which are both political and economic.

 

“There will be resistance to build a new city which will also mean diversion of resources. Unless you think of the example of Telangana, which was carved out from Andhra Pradesh. That state could not access Hyderabad and so had to focus on building a new capital,” he said.

 

India's cities face the problem of creaking and crumbling infrastructure where the inflow of population outpaces the rate of development which often strains resources. Still the cities need to upgrade to make them more habitable as millions shift every year for better job opportunities and aspiring lifestyles.

 

He also said that if India needs to grow at 8 per cent to achieve the vision of ‘Viksit Bharat’ by 2047, then urban population has to grow rapidly.

 

“To have 8 per cent growth and attain the vision of Viksit Bharat, you have to grow at more than 8 per cent, sometimes even at 9 per cent. But if you continue to grow at 6-6.5 per cent, it will just be business as usual,” he said.