Syllabus: GS1/Urbanisation, GS3/Infrastructure
Context
- The Union Budget, Economic Survey 2026 and 16th Finance Commission have emphasised the need for a National Urbanisation Policy to address gaps in urban planning and governance.
Status of Urbanisation in India
- Urban population: India had 377 million urban residents across approximately 8,000 cities and towns in 2011.
- The United Nations estimates that 44% of India’s population currently lives in urban areas, which is projected to exceed 720 million by 2050.
- Changing settlement patterns: Around 94% of urban settlements are small towns, while nearly 60% of the urban population lives in Class I cities.
- Growth of peri-urban areas: Peri-urban areas are expanding at approximately 4.15% annually, compared to 2.9% growth within existing city boundaries.
- Functional urbanisation: The Economic Survey 2026 highlighted that India is more urban in functional terms than official definitions suggest, citing satellite-based estimates that placed India’s urbanisation at 63% in 2015.
Constitutional Framework
- Article 243Q: Provides for the constitution of Nagar Panchayats, Municipal Councils and Municipal Corporations.
- Article 243W: Empowers state legislatures to devolve powers and responsibilities to municipalities.
- Twelfth Schedule: Lists 18 functions that may be entrusted to urban local bodies.
- Article 243ZD: Provides for District Planning Committees.
- Article 243ZE: Provides for Metropolitan Planning Committees.
Limitations of the Existing Urban Classification
- Outdated Census criteria: Census 2027 will retain the 2011 criteria for identifying census towns:
- Population of at least 5,000.
- Population density of at least 400 persons per sq. km.
- At least 75% of male main workers engaged in non-agricultural activities.
- Administrative limitations: Article 243Q gives states discretion in notifying areas as urban without prescribing uniform criteria or mandatory periodic reviews.
- Mismatch between economic activity and governance: Several settlements with predominantly non-agricultural employment continue to be governed as rural areas.
- Inadequate spatial planning: Around 52% of statutory towns and 76% of census towns lack master plans, resulting in unplanned expansion and infrastructure gaps.
Why is a National Urbanisation Policy Needed?
- Recognising emerging urban settlements: It will establish uniform criteria and conduct periodic reviews to identify settlements undergoing urban transformation.
- Integrated regional planning: It will promote planning beyond municipal boundaries, covering peri-urban areas and interconnected economic regions.
- Strengthening urban governance: It will improve coordination among Union, State and local governments and clarify institutional responsibilities.
- Improving municipal finances: India’s municipal revenue is approximately 1% of GDP, compared to 7.4% in Brazil and 6% in South Africa.
- A coherent policy can strengthen municipal revenue mobilisation and ensure predictable fiscal transfers.
Recommendations for a National Urbanisation Policy
- WRI (World Resources Institute) India’s report ‘Equitable, Productive, Low-carbon and Resilient System of Cities in India – Recommendations for a National Urbanisation Policy’ proposes seven systems transformations:
- Standardise the definition and classification of statutory urban settlements;
- Modernise spatial and regional planning;
- Reorient public and private finance flows into urbanisation;
- Embed a tiered coordination architecture, anchored by a National Urbanisation Council;
- Build sectoral reforms on functional foundations;
- Align urban politics with reform incentives; and
- Support knowledge exchange and local innovation.
Concluding remarks
- India needs to move beyond the traditional rural-urban classification towards a functional approach to urbanisation.
- A National Urbanisation Policy can provide a common institutional and fiscal framework for managing this transition while promoting equitable, productive, low-carbon and resilient cities.
Source: TH
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