Cities fundamentally shape the lives of millions in India, serving as hubs for work, education, migration, family life, and livelihood opportunities. Beyond these daily functions, urban centers are pivotal engines of economic growth, yet they are often synonymous with challenges like congestion, traffic jams, and inadequate civic amenities. The 2026 Economic Survey highlights a critical paradox: India is more urbanized in economic, functional, and spatial terms than traditional metrics suggest, but its cities lack the institutional, fiscal, and planning frameworks needed to fully realize their potential.
The Urbanization Surge and Its Implications
By 2036, according to World Bank estimates, India's towns and cities will house 600 million people, accounting for 40% of the population, a significant rise from 31% in 2011. Urban areas are projected to contribute nearly 70% to the country's gross domestic product (GDP). The survey notes, "Urbanisation has concentrated productivity, innovation and labour markets in our cities, but it has also concentrated congestion, informality, and complexity of governance." This dual nature underscores the urgent need for strategic interventions to harness urbanization's benefits while mitigating its downsides.
Recognizing Cities as Economic Infrastructure
A key insight from the survey is the necessity to view cities as essential economic infrastructure. This perspective shift is crucial for aligning public policy, fiscal priorities, and planning frameworks with India's development trajectory. As the survey emphasizes, "Recognizing cities as economic infrastructure is a necessary first step toward aligning public policy, fiscal priorities, and planning frameworks with India's development trajectory." This recognition paves the way for targeted reforms aimed at enhancing both quality of life for residents and economic gains for the nation.
Strategies for Unlocking Urban Potential
To address urban challenges, the survey proposes several actionable strategies. First, unlocking urban land through clear property titles and increased density norms, such as floor space index (FSI) and floor area ratio (FAR), is essential. This approach can free up land for development, not only for affordable housing and public transport but also for critical amenities like sanitation, sewage and garbage disposal systems, and circular water systems.
Prioritizing People Over Vehicles
For traffic management, the survey urges urban bodies to prioritize people over vehicles by improving public transport networks. Enhancing public transit can boost productivity while simultaneously improving liveability, reducing congestion, and promoting sustainable urban mobility.
Reforming Urban Governance
Another critical area is urban governance reform. Currently, electoral, fiscal, and administrative responsibilities in Indian cities are fragmented across multiple tiers within an unwieldy administrative structure. This fragmentation constrains city governments' ability to mobilize revenues, coordinate planning, and make long-term investment decisions. The survey observes, "There is a case made for aligning authority and accountability, because even as Indian cities are administered, global cities are governed." Strengthening city governments with better financial planning, access to grants, and enhanced accountability is vital for effective urban management.
Building a Credible Civic Compact
Physical investments alone will not suffice; they must be accompanied by the introduction and enforcement of rules and regulations that foster resident participation in making urban areas livable. The survey terms this "a credible civic compact that aligns incentives" between citizens and the state. When cities are planned, financed, and governed with this purpose in mind, urbanization can become a source of shared prosperity and improved quality of life for all citizens.
In summary, as India urbanizes rapidly, strategic reforms in land use, governance, and infrastructure are imperative to transform cities into engines of sustainable growth and enhanced livability, ensuring they meet the needs of future generations.
