India’s urban sector budget outlay has increased tenfold since 2014, NITI Aayog member Rajiv Gauba said on Sunday, highlighting government initiatives aimed at accelerating urban development and improving infrastructure across cities.
Speaking at the valedictory session of the 2nd National Urban Conclave, Gauba said missions such as Smart Cities, AMRUT, Pradhan Mantri Awas Yojana, Swachh Bharat and the Urban Livelihoods Mission had supported the development of Indian cities.
He also cited investments of around Rs 3.7 lakh crore in metro rail and bus systems.
The former Cabinet Secretary said stronger urban governance, improved municipal finances and reforms in planning and housing would be essential to unlock India’s urban growth potential.
Urban sector budget outlay supports growth hub initiative
Gauba outlined NITI Aayog’s growth hub initiative, including the Rs 1 lakh crore Urban Challenge Fund announced in the Union Budget for 2025-26.
He also referred to the budget allocation of Rs 5,000 crore each for seven city economic regions over five years. The initiative aims to strengthen cities as centres of economic activity.
Gauba stressed that urban development would require city governments with greater authority and institutional capacity. He said empowering municipal administrations was essential for better service delivery and meaningful citizen participation.
NITI Aayog calls for stronger city governance
Referring to the report Moving Towards Effective City Governance, jointly developed by NITI Aayog and the Ministry of Housing and Urban Affairs (MoHUA), Gauba called for changes to municipal governance structures.
The recommendations include directly elected mayors with five-year terms, a Mayor-in-Council system and timely municipal elections.
He also urged states to devolve all 18 functions listed under the 74th Constitutional Amendment to urban local bodies. These include master planning, water supply, fire services and traffic management.
Gauba said city governments needed the authority to address local requirements rather than relying entirely on decisions made by state capitals.
Municipal finances need stronger revenue collection
Gauba highlighted low municipal revenues as a key challenge for urban governance. He called for better property tax collection and recovery of user charges to strengthen the financial position of urban local bodies.
He said the share of Central Finance Commission grants allocated to urban local bodies had increased to 45 per cent from 36 per cent, with allocations more than doubling compared with the previous level.
However, he noted that fiscal transfers from states to cities remained low. He called for State Finance Commissions to be constituted regularly and for adequate financial transfers to municipal bodies.
Planning reforms and affordable housing in focus
Gauba called for changes to urban planning regulations that restrict land supply and increase costs for residential and commercial development.
He advocated reforms to floor area ratio (FAR) limits and building norms, alongside mixed-use zoning, transit-oriented development and land pooling.
These measures, he said, could expand land availability and reduce costs for housing and economic activity.
The NITI Aayog member also highlighted the need for affordable rental housing for migrant workers, industrial labourers, students and young professionals. He urged states to adopt the Model Tenancy Act to encourage greater rental housing supply.
States urged to implement municipal reforms
Gauba said states could implement the proposed changes through new Municipal Acts. He also urged MoHUA to link support under urban missions to the implementation of governance and planning reforms.
He emphasised that empowered city governments, adequate funding and improved planning frameworks would be important to strengthening urban services and supporting India’s long-term economic development.
