As India pushes towards its ambition of becoming a $30 trillion economy and achieving the vision of Viksit Bharat by 2047, the spotlight is firmly shifting to its cities. According to a new report by NITI Aayog, urban India will be the primary engine of economic growth, innovation, and job creation, but only if longstanding governance bottlenecks are addressed.
The structural gap holding cities back
The report, titled “Moving Towards Effective City Government – A Framework for Million-plus Cities,” makes a clear argument: India’s cities are underperforming not due to lack of potential, but because of weak institutional design. Fragmented governance structures, limited devolution of powers, poor financial autonomy and diffused accountability continue to constrain urban performance.
It notes that while cities contribute significantly to national output, their ability to deliver services efficiently and respond to growing demands is hampered by overlapping authorities and unclear lines of responsibility. The absence of empowered local leadership further dilutes decision-making, slowing down execution and weakening accountability.
A roadmap for empowered city governments
At the heart of the report is a push to fundamentally rethink how Indian cities are governed. It calls for a shift towards empowered city governments where authority, responsibility and financial resources are clearly aligned at the urban level.
A key recommendation is the introduction of directly elected mayors with fixed tenures, supported by a Mayor-in-Council system that can provide continuity in governance and sharper accountability. This, the report argues, would address the current fragmentation in leadership and create a single point of responsibility for city outcomes.
The report also emphasises the need to integrate urban service delivery. Functions such as water supply, sanitation and public transport, which are currently spread across multiple agencies, should be brought under city governments to improve coordination and efficiency. Without such integration, cities will continue to struggle with gaps in service delivery and infrastructure planning.
Fixing the finances of urban India
Another critical pillar of reform lies in strengthening municipal finances. The report highlights that most urban local bodies remain heavily dependent on state and central transfers, limiting their autonomy and planning capabilities.
To address this, it calls for improving cities’ own revenue generation through better tax systems and user charges, while also ensuring more predictable and timely fiscal transfers via stronger State Finance Commissions.
It also points to the need for cities to tap market-based instruments such as municipal bonds, enabling them to raise capital for infrastructure development in a sustainable manner.
Reform push: role of states and Centre
For these changes to take root, the report stresses the need for legislative and policy backing. It calls on states to amend their Municipal Acts to reflect the proposed governance reforms, while urging the Ministry of Housing and Urban Affairs to update the Model Municipal Law and provide both guidance and incentives for adoption.
Recognising the scale and complexity of the transformation, the report advocates a phased implementation strategy. This approach would allow for piloting reforms, learning from early experiences and gradually scaling up successful models across cities.
The bigger picture: cities as growth engines
Rajiv Gauba, member of NITI Aayog, described the report as the outcome of extensive deliberations, data-driven analysis and global benchmarking. He pointed out that India still lacks “city governments in the true sense,” and that this gap must be addressed to unlock urban potential.
The message is clear: India’s next phase of growth will be driven not just by policy ambition, but by how effectively its cities are governed. Strong, empowered and accountable city governments are no longer just an administrative ideal, they are a strategic necessity.