THEBUSINESSBYTES
BUREAU
BHUBANESWAR,
OCTOBER 25, 2026
Calling for sweeping
reforms in urban governance, planning and financing, NITI Aayog Member Rajiv Gauba
has said cities cannot be effectively governed from state capitals and stressed
the need to empower urban local bodies with greater autonomy, financial
resources and decision-making powers to unlock India’s growth potential.
Addressing the
valedictory session of the 2nd National Urban Conclave in Bhubaneswar on Sunday,
Gauba said empowered city governments were essential to improving public
service delivery, strengthening citizen participation and realising the vision
of Viksit Bharat by 2047.
“We can’t run cities from state capitals,” he
said, underlining the need for city administrations to have the authority and
institutional capacity to respond effectively to local needs.
Highlighting India’s
rapid demographic and urban transition, Gauba said the country’s population was
expected to continue growing for several decades before stabilising at around
165 crore by 2060. Nearly half of the population is projected to live in urban
areas by 2050, with the urban population increasing from around 50 crore at
present to 85 crore.
He said this
unprecedented expansion would require a fundamental transformation in the way
cities were planned, governed and financed, particularly to meet the growing
demand for infrastructure, housing and essential public services.
Describing cities as
engines of economic growth where talent, capital and ideas converge, Gauba
observed that urban centres had experienced relative neglect in the
post-Independence period despite India’s rich legacy of planned settlements.
Since 2014, however, concerted
efforts have been made to strengthen the urban sector through initiatives such
as the Smart Cities Mission, AMRUT, Pradhan Mantri Awas Yojana, Swachh Bharat
Mission and the Urban Livelihoods Mission, he said.
The budgetary
allocation for the urban sector has increased tenfold, while investments of
around Rs 3.7 lakh crore have been made in metro rail and bus transport
systems, Gauba noted.
Referring to NITI
Aayog’s Growth Hub initiative, he highlighted the Rs 1 lakh crore Urban
Challenge Fund announced in the 2025-26 Union Budget to develop cities as
growth hubs. He also pointed to the allocation of Rs 5,000 crore each for seven
city economic regions over five years in the current budget.
Emphasising the need
for structural reforms in urban administration, Gauba referred to the report
Moving Towards Effective City Governance, jointly prepared by NITI Aayog and
the Ministry of Housing and Urban Affairs (MoHUA).
He called for
directly elected mayors with five-year terms, the introduction of a Mayor-in-Council
system and the timely conduct of municipal elections to strengthen
accountability and improve governance at the city level.
States must devolve
all 18 functions envisaged under the 74th Constitutional Amendment to urban
local bodies, including master planning, water supply, fire services and
traffic management, he said.
Without meaningful
devolution of powers, city governments would remain constrained in their
ability to address local challenges and ensure effective public participation,
Gauba added.
On municipal
finances, he expressed concern over low revenue generation by urban local
bodies and called for better property tax collection and recovery of user
charges.
While grants from the
Central Finance Commission to urban local bodies have more than doubled
compared with the previous allocation, with their share increasing from 36 per
cent to 45 per cent, the devolution of funds from state governments to cities
remains inadequate, he said.
Gauba stressed the
need for regular constitution of State Finance Commissions and adequate fiscal
transfers to municipal bodies to enable them to discharge their
responsibilities effectively.
Turning to urban
planning and housing, he called for a comprehensive overhaul of the existing
planning framework, arguing that restrictive floor area ratios (FARs) and
building regulations constrain land supply and push up costs for residential
and commercial users.
He advocated
mixed-use zoning, development around transit hubs and land pooling to expand
the availability of land, reduce housing costs and facilitate economic
activity.
Highlighting the
growing importance of rental accommodation, Gauba said affordable rental
housing was crucial for migrant workers, industrial labourers, students and
young professionals. He urged states to adopt the Model Tenancy Act to
encourage investment and expand the supply of rental housing.
Concluding his address, Gauba said states could implement the proposed reforms through new Municipal Acts. He also urged MoHUA to link support under urban missions to the implementation of governance and institutional reforms.
Empowered city governments, backed by adequate financial resources, clear responsibilities and greater administrative autonomy, are essential to harnessing the economic potential of urban India and achieving the broader goals of Viksit States and Viksit Bharat, he said.