Building empowered cities

Strong local governments are essential for sustained growth

India’s ability to sustain rapid economic growth will increasingly depend on how well its cities are governed. With the urban population projected to rise from around 500 million currently to 850 million by 2050, the pressure on housing, transport and basic services will intensify. In this context, NITI Aayog member Rajiv Gauba recently argued for a fundamental change in how cities were planned, governed and financed. His observation that cities cannot be governed from state capitals underlines a fundamental weakness in India’s urban governance framework — the lack of autonomy for urban local bodies (ULBs). A recent NITI Aayog report titled “Moving Towards Effective City Government” highlighted weak devolution, fragmented responsibilities, and inadequate municipal finances. The 74th constitutional amendment, which intended to strengthen local self-government, remains incomplete. Although the Constitution lists 18 functions for possible devolution, responsibilities such as urban planning, water supply, transport and sanitation are often divided among municipal corporations, state departments, and specialised agencies.

 Political leadership is equally constrained. Mayors often lack executive and financial powers, while municipal commissioners exercise substantial administrative authority and may be transferred frequently. Besides, as a Comptroller and Auditor General study published in 2024 has found, municipal elections were delayed in more than 61 per cent of ULBs across 17 audited states. Short mayoral tenures and delayed elections weaken continuity, making long-term planning difficult. This is a serious drawback and must be addressed. India has increased investment in urban infrastructure in recent years. The budgetary outlay for the urban sector has grown substantially over the years. The ₹1 trillion Urban Challenge Fund, announced in the 2025-26 Union Budget, and allocations of ₹5,000 crore each for seven city-economic regions over five years seek to strengthen cities as growth hubs. However, infrastructure spending alone cannot deliver better outcomes without capable local institutions. Municipalities need trained personnel, effective coordination among service agencies, and greater authority to respond to local needs.

 Further, weak finances restrict municipal autonomy. A Reserve Bank of India report (2024), covering 232 municipal corporations, found that their own revenues remained inadequate to meet routine expenditure. Improving property-tax assessments, expanding digital land records, and strengthening user-charge collection can help cities mobilise their own resources. State Finance Commissions must be constituted on time, and their recommendations implemented transparently. The 16th Finance Commission’s increased grants to urban local governments provide an opportunity, but transfers alone cannot improve service delivery unless municipalities have the capacity to use funds effectively. Reforms can begin with million-plus cities before being extended to smaller urban centres. These cities have established institutions and a greater capacity to implement changes, making them suitable starting points. India’s urban challenge is not simply to build more infrastructure but to ensure that cities can manage it effectively. States must devolve responsibilities along with adequate funds, staff and decision-making powers. Empowered and accountable municipal governments are essential in improving living standards, attracting investment, and ensuring that urbanisation supports sustained economic growth.