Urban renewal: Indian cities need a governance overhaul

However, significant as these developments are, they are not sufficient. India shows a weaker correlation between urbanization and GDP than global counterparts: a 1% rise in urbanization correlates with an increase of only 1.7% in per capita GDP, versus 3.9% globally. Meanwhile, 59% of our urban population faces water scarcity and 80% breathes unhealthy air. Further, estimates suggest India is far more urban than official figures indicate.

Also Read: Traffic penalties based on income levels would be both effective and equitable

India’s urban challenges require us to look beyond infrastructure and service delivery to address challenges of the commons: economic growth and job creation, equitable access to services and opportunities, environmental sustainability and democratic engagement. This requires understanding cities as systems.

The visible challenges of urban life—traffic congestion, pollution, waste management, etc—are symptoms of weak city-systems, the quality of which determines how effectively a city delivers services and ensures the well-being of residents. This thinking recognizes that each city has unique spatial, social and economic characteristics, calling for a place-based approach to urban governance. 

Rooted in this thinking, we have identified three critical pathways for India’s urban transformation: planning and design, decentralized participatory governance and state capacity in human resources and municipal finance.

Strengthen planning and design: India has added 971 new cities and towns since Census 2011, bringing the total to over 4,800. While these urban areas vary in size and typology, they are governed by similar laws. States like Bihar and Jharkhand apply the same municipal law to million-plus cities and small towns, ignoring fundamental differences in economic potential and governance needs. India’s urban governance needs a differentiated approach.

This approach would operate across three dimensions. First, a differentiated approach for metropolitan (million-plus population), emerging (100,000–1 million) and small (under 100,000) cities would address the specific challenges of each category. This would call for City Action Plans, which include neighbourhood-scale spatial development plans and could overcome challenges of fragmented funding, governance and accountability. 

Second, it would leverage India’s unique spatial pattern of urbanization, where 50% of the urban population lives within 60km of 45 million-plus cities and 92% within 60km of 470 larger cities, creating opportunities for shared infrastructure. 

Third, it would address rural-urban transitions, recognizing that close to 24,000 large villages already exhibit urban characteristics but are governed as rural.

Also Read: Urban congestion: Let’s use parking fees to unclog Indian streets

There is an urgent need for a robust rural-urban transition policy that provides frameworks for governance, infrastructure and financing of fast-urbanizing areas. Odisha’s rural-urban transition policy offers a promising model.

Realizing these opportunities requires us to re-imagine our institutions. The housing and urban affairs ministry and state urban departments need to evolve from being focused on schemes and infrastructure to being enablers of regional economies and strong local governments.

Decentralize participatory governance: Global experience shows that empowered local governments foster economic growth, reduce corruption and deliver better services. Yet in India, three decades after the 74th Constitutional Amendment Act mandated democratic decentralization, urban local governments (ULGs) remain constrained. 

On average, only 42% of the Act has been implemented by states. These gaps manifest in three critical areas: delayed elections (61% of ULGs across 15 states report delayed council elections, with an average delay of 22 months); severely limited devolution of functions (only 5 of 18 functions are effectively devolved) and weak citizen participation (only 5 of 35 states/Union territories (UTs) mandate ward committees and area sabhas, with none implementing them).

When local bodies lack decision-making authority and regular elections, citizens lose their most direct link with democratic governance. Bolstering decentralized participatory governance requires decisive action: empower State Election Commissions to ensure timely elections, devolve all functions to ULGs with real administrative and fiscal autonomy, and activate ward committees and area sabhas with dedicated budgets for citizen participation. These reforms may require amending the 74th Amendment with updated provisions.

Build state capacities: While legal empowerment through the 74th Amendment is crucial, cities need robust human and financial capacities to deliver quality services. The human resource deficit in our cities is acute: ULGs in 15 states face an average vacancy of 37%, only 14 of 35 states/UTs mandate any training for officials and none of the 18 states studied has a performance measurement system. Three key levers can reform this: revamp cadre and recruitment rules with scientific staffing assessments; implement competency-based systems; and explore shared municipal services.

Also Read: Local government reforms can create a new vision for India’s cities of the future

Municipal finances face similar challenges. Per capita annual infrastructure investment stands at ₹2,701, far below the required ₹7,884. Cities with populations below 1 million rely heavily on grants (57%). ULGs in 11 states have used only 61% of available funds. Recent progress in municipal finance transparency, with 96% of ULGs publishing audited accounts, shows that reform is possible. 

We must build on this foundation by strengthening fiscal decentralization, optimizing revenue generation and implementing digital public finance management systems. We must also develop a shelf of projects across cities to catalyse municipal borrowings.

An urban transformation requires a basic rehaul of city governance. The three pathways outlined—planning and design, decentralized participatory governance and strengthened state capacity in human resources and municipal finance—will go a long way towards that goal. The future of our cities depends on a transition from schemes to systems, sectors to places and from Central and state-driven to local government-led urban development.

Anandita Jumde of Janaagraha contributed to this article.

The author is CEO, Janaagraha.