Bhubaneswar: The budgetary outlay for the urban sector has increased tenfold since 2014, driven by concerted efforts through several major missions, including Smart Cities, AMRUT, Pradhan Mantri Awas Yojana, Swachh Bharat and the Urban Livelihoods Mission, to accelerate development in Indian cities, NITI Aayog member Rajiv Gauba said on Sunday.
Investments of about Rs 3.7 lakh crore have also been made in metro rail and bus transport systems.
Addressing the valedictory session of the 2nd National Urban Conclave, Gauba, a former Cabinet Secretary, outlined NITI Aayog’s growth hub initiative. He referred to the Rs 1 lakh crore Urban Challenge Fund announced in the Union Budget for 2025-26 to develop cities as growth hubs, as well as the allocation of Rs 5,000 crore each for seven city economic regions over five years in this year’s Budget.
He underscored the importance of empowering city governments in the true sense of the term to improve service delivery and ensure effective citizen participation. Referring 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 timely municipal elections.
He emphasised the need for states to devolve all 18 functions to urban local bodies (ULBs) in accordance with the 74th Constitutional Amendment, including master planning, water supply, fire services and traffic management. He stressed that cities cannot be effectively governed from state capitals and that city governments must have the authority and institutional capacity to respond to local needs. Such measures, he said, are essential to ensuring meaningful citizen participation.
Gauba said municipal revenues remain low and called for improvements in property tax collection and user-charge recovery. He pointed out that grants from the Central Finance Commission to ULBs had more than doubled compared with the previous allocation, with their share increasing to 45 per cent from 36 per cent. However, the devolution of funds from states to cities remains inadequate. He called for State Finance Commissions to be constituted regularly and for adequate fiscal transfers to urban local bodies to be ensured.
On urban planning and housing, Gauba highlighted the need for a comprehensive overhaul of the existing planning paradigm. He called for reforms to remove restrictive floor area ratios (FARs) and building regulations that constrain land supply and drive up costs for residential and commercial users. He also stressed the need to adopt mixed-use zoning, promote development around transit hubs and implement land pooling to increase land supply and reduce costs for housing and economic activities.
He highlighted the importance of affordable rental housing for migrant workers, industrial labourers, students and young professionals. He also urged states to adopt the Model Tenancy Act to expand the supply of rental housing.
Gauba said these reforms could be implemented by states through new municipal laws. He urged MoHUA to ensure their implementation by linking them to support under various urban missions.
He emphasised that empowered city governments are essential to unlocking India’s urban growth potential and realising the vision of Viksit States and Viksit Bharat.
