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.