Power Without the City: Why India’s Urban Growth is Way Faster than its Governance

India never truly planned to urbanise at all, and that is exactly why it finds itself with over 500 million people living in towns and cities that it never truly decided to build, or at least properly planned to. No sector in Indian policy demonstrates the gap between policy intent and administrative reality quite like urban governance. The fundamental issue in the sector, in simple terms, is that Indian cities have been given far too much responsibility without the actual power to back it up. 

Illustration by The Geostrata

WHY DOES THIS NEGLECT ACTUALLY EXIST?

The urban population in India has grown from roughly 290 million in 2001 to an estimated 534 million today. However, even now, this population is governed by 4,000-odd Urban Local Bodies that command less than 1% of GDP in their own revenue capacity against 5-8% in comparably federal systems like Brazil or South Africa.

The gap is generally not an issue of funding; the design failure of the system dates back to the 74th constitutional amendment of 1992, which promised cities the same constitutional standing given to villages in the 73rd amendment, complete with ward committees, District and Metropolitan Planning Committees, and eighteen devolved functions ranging from water supply down to slum improvement. Now, to understand the issue of this gap, we must identify the 3 Fs of local governance, those being funds, functionaries, and functions. The system catered even in the amendment largely towards functions and not the other two.

Part of the 74th Amendment's answer was the introduction of Metropolitan Planning Committees, meant to consolidate planning across the dozens of agencies that run a city, since a municipal corporation rarely governs alone. Delhi alone is governed by the MCD, the DDA, the PWD, the DJB, and the DMRC, each accountable to a different authority and not to the city's elected council.

An MPC was supposed to be the single table where these overlaps reconciled into one plan. In practice, most cities that qualify for one under the Amendment have failed or delayed to constitute it, and where an MPC exists on paper, it carries no binding authority over the bodies it's meant to coordinate; it is a replication of the same non-binding defect that breaks down State Finance Commissions.

Three decades after the amendment, the majority of the promised architecture exists only on paper, not in practice. There is a consistent pattern across states and party lines in one particular behavior: the devolution of functions without devolution of finances and further devolution of finances without devolution of functionaries.

A municipal corporation may well be responsible for town planning. Still, land-use decisions routinely require state governments to sign off; the corporation may be necessary for hiring engineers and sanitation staff, but cadre control often actually sits with the state urban development department. The net effect is that the local urban body only looks like a government on paper but actually remains a subordinate department in practice. 

THE FINANCIAL TRAP

Municipal finance rests on three legs, and all three are weak in the current Indian governance structure. Property tax, the largest own-source revenue for most Urban Local Bodies, suffers from largely outdated valuation rolls, poor digitization of property records, and collection efficiency of just 40-65% of the demand in reformed cities like Bogota. Reassessment is politically unpopular in election years, so valuation rolls often go a decade or more without proper update and quietly erode the revenue base even as property values rise.

State finance commissions are the constitutional mechanism to make sure states share a fixed proportion of state revenue with ULBs every five years, just like the Union finance commission.

However, they are chronically delayed and, more importantly, routinely non-binding. Unlike the finance commission awards at the centre, which do carry legal and also political weight, SFC recommendations are frequently left accepted in part or even simply unimplemented by state governments that view them as advisories rather than obligations. 

Finally, municipal bonds, being the third leg, remain only a boutique instrument for raising finance. Fewer than 20 cities have issued them since Pune’s debut in 2017, which remains a rounding error against an urban infrastructure deficit estimated to be at $840 billion to $1.2 trillion over 2 decades. Cities cannot exactly borrow meaningfully against revenue they do not control, pledge assets they don’t own, or even demonstrate reasonable creditworthiness when a state government can override their budget at will. 

SCHEME BOTTLENECKS SHOWING THE UNBUILT CAPACITY

India has not lacked urban schemes but rather only the absorption capacity for them. JNNURM tied funds to a comprehensive 21-point reform agenda, but states routinely certified reforms like property tax modernization as "complete" without any substantive underlying change. 

AMRUT (2015) simplified the model and sped up disbursement, but ran into the same wall from a different angle because physical progress on the ground consistently lagged financial progress on paper, meaning money was recorded as spent well even before pipes were actually laid or treatment plants were commissioned.

Smart Cities Mission (2015) is the sharpest case study in this pattern of lack of capacity and power. It created Special Purpose Vehicle company structures under the Companies Act explicitly to bypass slow municipal corporations. 

This was, in effect, a built-in admission that they no longer trusted the very institution the mission was meant to strengthen and that that very institution was being seen as a roadblock or middleman in the value chain of developing Indian cities.

The result was a parallel and unaccountable governance layer with weak linkage to elected councilors and no institutional afterlife once mission funding tapers off. 

PMAY-Urban has been considerably stronger at sanctioning housing units than at filling them, with vacancy rates above 20-30% in several projects, because peripheral land chosen for its low cost lacks transport connectivity, schools, and livelihoods that make housing genuinely livable.

THE SPILLOVER INFORMAL HOUSING 

Slums are not a planning failure that happened despite the state's efforts. They are the predictable response of low-income households to a state that never planned their presence in the first place. 

Master plans across Indian cities have assumed populations and land uses disconnected from actual migration patterns, then treated whatever settlement emerged outside those assumptions as illegitimate. Even with conservative estimates, 65-70 million Indians live in slum conditions, though cities like Mumbai, where over 40% of residents live informally, suggest serious undercounting.

Policy has oscillated between two failures. Forced eviction destroys livelihoods and social capital without solving the underlying problem of land supply that produced the settlement.

In-situ regularisation, meanwhile, often produces poorly built vertical slums with rehabilitation towers handed over to developers under cross-subsidy models, with minimal open space and little attention to long-term maintenance.

Neither approach addresses the root cause: a decades-long undersupply of affordable formal housing near employment centres, driven by restrictive floor space index, rent control laws that harmed the rental housing market, and land-use conversion processes so slow and discretionary that informality remains the only viable option for the urban poor. 

POLITICAL INCENTIVE

Ultimately, it is a question of incentives rather than ignorance as to why municipal corporations remain neglected. State legislators have little reason to empower institutions that could become power centres. Mayors typically serve largely ceremonial terms, with real executive authority resting in a state-appointed Municipal Commissioner. 

Municipal elections are frequently delayed for years past constitutional deadlines, with limited consequence, because no strong enforcement mechanism compels compliance the way it does for state or Union elections. Urban administration has become a transitional bureaucratic posting rather than a specialised career track. 

DEVOLUTION AND POWER

The solution runs with the theme of meaningful devolution by firstly making State Finance Commission awards statutorily binding, with a timeline to avoid shelving their recommendations indefinitely, or implementing only the politically convenient portions. Binding these awards, on the model of the Union Finance Commission, would replace ad hoc or discretionary transfers with a predictable, formula-based revenue share that ULBs can actually plan budgets around to ensure governance for the local bodies becomes predictable. 

The second would be closing the listed bottlenecks by replacing Smart City-style Special Purpose Vehicles with direct capacity-building transfers into municipal corporations. SPVs deliver visible, fast infrastructure but build no lasting capacity, and the gains vanish once mission funding ends.

Channelling equivalent funds through ULBs directly, paired with technical assistance and oversight, ensures capacity persists beyond any single funding cycle. Moving ahead would be to address the housing crisis created by the lack of proper policies affecting how the housing market operates in Indian cities in terms of formal housing.

This could be done through reforming floor space index limits and land-use conversion processes to expand the formal affordable housing supply near centres of employment, as Informality is fundamentally a land-supply problem and should be seen as such. Restrictive FSI regimes and slow, discretionary conversion approvals push the poor and the lower-middle class into informal markets by default because loosening the formal supply is a precondition for any housing scheme actually to succeed.

The more critical reform necessary would be the creation of political discipline within local governance by enforcing constitutionally mandated municipal election timelines through an empowered State Election Commission with penalties for non-compliance.

Delayed elections currently carry no cost for state governments. Attaching financial or administrative consequences to non-compliance would restore the basic political accountability that every other reform on this list ultimately depends on.

India's urban future will be decided by whether this quiet and rather unglamorous machinery of municipal government is finally allowed to function as the Constitution intended.

---

BY KRISH

TEAM GEOSTRATA

info@thegeostrata.com