India needs comprehensive reforms in urban governance, planning and financing to accommodate its rapidly expanding urban population and realise the vision of Viksit Bharat by 2047, NITI Aayog Member Rajiv Gauba said at the valedictory session of the second National Urban Conclave.
Highlighting the scale of the country’s demographic transition, Gauba said India’s population could stabilise at approximately 165 crore around 2060. Nearly half of the population is expected to live in urban areas by 2050, with the urban population projected to increase from around 50 crore currently to 85 crore.
This expansion will significantly increase demand for housing, infrastructure and essential services, requiring a fundamental shift in how cities are planned, governed and financed.
Urban governance needs structural reforms
Describing cities as centres of economic growth where talent, capital and ideas converge, Gauba said urban development had received renewed attention since 2014 through initiatives such as the Smart Cities Mission, AMRUT, Pradhan Mantri Awas Yojana, Swachh Bharat Mission and the Urban Livelihoods Mission.
The budgetary allocation for the urban sector has increased tenfold, while investments of approximately ₹3.7 lakh crore have been made in metro rail and bus transport systems, he said.
Gauba also highlighted NITI Aayog’s Growth Hub initiative and the ₹1 lakh crore Urban Challenge Fund announced in the Union Budget for 2025-26 to support the development of cities as growth hubs.
In addition, the latest Budget has provided for an allocation of ₹5,000 crore each for seven city economic regions over five years.
Directly elected mayors and greater autonomy
Gauba called for empowering city governments to improve public service delivery and strengthen citizen participation.
Referring to the report Moving Towards Effective City Governance, jointly developed by NITI Aayog and the Ministry of Housing and Urban Affairs (MoHUA), he advocated directly elected mayors with five-year terms, a Mayor-in-Council system and timely municipal elections.
He urged state governments to devolve all 18 functions envisaged under the 74th Constitutional Amendment to urban local bodies, including master planning, water supply, fire services and traffic management.
City governments must have the authority and institutional capacity to respond to local requirements rather than depend excessively on state capitals for decisions, he said.
Such empowerment is essential to make urban administration more accountable and ensure meaningful participation by citizens in local decision-making.
Municipal finances need a boost
Gauba identified weak municipal revenue mobilisation and inadequate fiscal devolution as major constraints on urban development.
He called for better collection of property taxes and user charges to strengthen the financial position of urban local bodies (ULBs).
While Central Finance Commission grants to ULBs have more than doubled compared with the previous allocation, their share has increased from 36% to 45%, he noted. However, transfers from state governments to cities remain inadequate.
He stressed the need to constitute State Finance Commissions regularly and ensure adequate fiscal transfers to municipal bodies.
Greater financial autonomy would help cities fund infrastructure, maintain public assets and respond more effectively to the needs of their growing populations.
Planning reforms to lower housing costs
Gauba called for an overhaul of urban planning frameworks, arguing that restrictive floor area ratios (FARs) and building regulations constrain land supply and increase costs for residential and commercial users.
He advocated mixed-use zoning, development around transit hubs and land pooling to expand the availability of developable land and reduce costs for housing and economic activities.
The reforms could help cities accommodate population growth more efficiently while improving access to employment and transport infrastructure.
He also highlighted the need to expand affordable rental housing for migrant workers, industrial labourers, students and young professionals.
State governments should adopt the Model Tenancy Act to encourage the supply of rental housing and improve access to accommodation for people moving to cities for work and education.
States urged to enact new municipal laws
Concluding his address, Gauba said the proposed reforms could be implemented through new Municipal Acts enacted by state governments.
He urged MoHUA to link support under urban development missions to the implementation of governance, planning and financing reforms by states.
Empowered city governments, stronger municipal finances and more flexible urban planning frameworks will be critical to meeting India’s infrastructure requirements and unlocking the economic potential of its cities, he said.
The reforms, Gauba emphasised, are essential to building Viksit States and achieving the broader vision of Viksit Bharat by 2047.