Need for a Unified Urbanisation Plan in India

UPSC Syllabus: Gs Paper 1- urbanisation, their problems and their remedies.

Introduction

India’s urbanisation is expanding beyond municipal boundaries, while classification, planning and governance remain tied to administrative boundaries. The 2027 Census is expected to retain conventional urban criteria, even as satellite estimates reveal a wider urban footprint. This gap affects access to planning, municipal finance and public services. A National Urbanisation Policy (NUP) is needed to effectively align classification, regional planning, finance and governance within a coherent, flexible framework.

Urbanisation in India: Current Status and Emerging Trends

1. Growing Urban Population: India had 377 million urban residents across approximately 8,000 cities and towns in 2011, while the United Nations projects over 720 million urban residents by 2050.
2. Changing Urban Estimates: Satellite-based data cited in the Economic Survey 2025–26 estimated that 63% of India’s population was urban in 2015, highlighting the gap between spatial estimates and official Census classification.
3. Expansion of Statutory Towns: Since 2011, States have notified another 1,000 statutory towns, indicating that formal urbanisation also depends on administrative decisions.
4. Uneven Settlement Distribution: Nearly 94% of urban settlements are small towns, while around 60% of the urban population lives in Class I cities, reflecting India’s diverse urban structure.
5. Wide Variation in Urban Scale: Greater Mumbai had nearly 12 million residents in 2011, whereas Gangotri Nagar Panchayat had only 110, illustrating significant differences in settlement size.
6. Rapid Peri-Urban Expansion: Peri-urban areas are growing at approximately 4.15% annually, compared with 2.9% within administrative boundaries, highlighting the need to plan beyond municipal limits.
7. Growing Policy Recognition: The 2026 Union Budget allocated ₹5,000 crore each to City Economic Regions, reflecting increasing policy attention towards regional economic development.

Rural–Urban Classification in India and Its Limitations

1. Statutory Town Classification: A settlement is classified as urban if it has a legally recognised Urban Local Body (ULB), such as a municipality, municipal corporation or cantonment board.
2. Census Town Criteria: A settlement qualifies as a Census town if it meets all three criteria: population of at least 5,000, density of at least 400 persons per sq. km and 75% of male main workers engaged in non-agricultural activities.
3. State Discretion in Urban Notification: Article 243Q(2) allows the Governor to specify urban areas through public notification, considering prescribed factors. Variations in State-level criteria create inconsistencies in urban classification.
4. Rural–Urban Binary Classification: Treating settlements as exclusively rural or urban overlooks transitional areas where built-up expansion and economic activities increasingly display urban characteristics.
5. Limitations of Urban Categories: Class I cities have populations of 1 lakh or more, encompassing settlements with widely differing economic functions, governance capacities and infrastructure requirements.
6. Classification-Linked Benefits: Urban classification influences access to master planning, municipal finance, Finance Commission grants, building regulations, environmental clearances and government schemes.

Emerging Challenges and Concerns in India’s Urbanisation

1. Peri-Urban Governance Gap: Rapid urbanisation without administrative changes leaves rural Panchayats responsible for land use, waste, water and air quality, despite lacking adequate mandates and technical capacity.
2. Inadequate Urban Planning Coverage: Approximately 52% of statutory towns and 76% of Census towns lack master plans, weakening the basis for regulating land use and guiding development.
3. Outdated Planning Legislation: Nine States have not updated their planning legislation since the 74th Constitutional Amendment, while the widely used model law dates to 1985.
4. Inadequate Contemporary Planning Provisions: Existing planning frameworks inadequately address the rural–urban continuum, land acquisition challenges and climate adaptation, limiting their ability to manage emerging urbanisation needs.
5. Incomplete Devolution of Municipal Functions: Article 243W makes devolution permissive, so urban notification does not automatically transfer all 18 functions listed in the Twelfth Schedule to municipalities.
6. Fragmented Regional Governance: Administrative jurisdictions often fail to match functional urban regions, limiting coordination among institutions responsible for infrastructure and environmental management.
7. Jurisdictional Limits of Environmental Management: Around 65% of Delhi’s PM2.5 originates outside the city, illustrating why city-level air-quality interventions alone cannot address regional pollution sources.
8. Weak Municipal Finances: Municipal revenue accounts for approximately 1% of Gross Domestic Product (GDP), compared with 7.4% in Brazil and 6% in South Africa, highlighting constraints on urban investment capacity.
9. Limited Revenue and Financial Predictability: Property tax contributes only 0.15% of GDP, while piecemeal transfers and limited access to blended finance constrain municipal resource mobilisation.

Need for a National Urbanisation Policy: Objectives and Significance

1. Establish a Coherent Policy Framework: Align existing classification rules, fiscal transfers and government schemes under common principles, addressing fragmented urbanisation policies without creating a parallel delivery system.
2. Recognise Transitional Settlements: Establish transparent recognition criteria and periodic reviews, enabling urbanising settlements to access appropriate planning, infrastructure and governance arrangements.
3. Promote Balanced Urban Development: Recognise the distinct needs of megacities, intermediate cities, small towns and transitioning settlements, avoiding uniform policies for settlements with different capacities and requirements.
4. Strengthen Cooperative Federalism: Establish shared national principles while allowing States and local governments to develop context-specific approaches according to their institutional capacities and local conditions.
5. Improve Institutional Accountability: Clarify institutional responsibilities and coordination mechanisms, making authorities more accountable for the combined outcomes of classification, planning and financing decisions.
6. Improve Fiscal Coordination: Align municipal grants, funding mechanisms and reform incentives to improve financial predictability and encourage better urban governance and service delivery.

Key Pillars of a Unified Urbanisation Framework

A. Foundational Reforms

1. Standardise Urban Classification: Establish common criteria for recognising urban settlements, supported by geospatial data, built-up growth and economic activity, with periodic reviews beyond the Census.
2. Modernise Spatial and Regional Planning: Update planning laws, strengthen regional planning and require peri-urban zoning, ensuring development decisions reflect settlement expansion beyond municipal boundaries.
3. Reorient Urban Finance: Strengthen municipal own-source revenues, predictable formula-based transfers and project preparation capacity, enabling local governments to finance urban development and expanding responsibilities.

B. Institutional and Governance Reforms

1. Establish a National Urbanisation Council: Create a coordination mechanism connecting existing institutions, including the Inter-State Council, Central Council of Local Government and NITI Aayog, to align urbanisation policies.
2. Strengthen Metropolitan and District Planning: Improve Metropolitan Planning Committees and District Planning Committees under Articles 243ZE and 243ZD, extending coordination beyond major metropolitan areas.
3. Align Governance with Functional Regions: Develop empowered institutions at appropriate geographical scales, including airsheds, river basins and city regions, to address challenges exceeding municipal jurisdictions.
4. Align Political and Fiscal Incentives: Design suitable reform-linked incentives that encourage States and municipalities to improve urban governance, while respecting local autonomy and strengthening accountability.

C. Sectoral Reforms and Local Innovation

1. Integrate Sectoral Planning: Align infrastructure, land use, economic development and environmental management with functional urban regions, reducing fragmented interventions across sectors.
2. Promote Knowledge Exchange and Local Innovation: Support knowledge-sharing, institutional learning and local innovation across cities and towns, helping governments develop context-specific solutions and improve governance performance.

Way Forward

1. Prioritise Foundational Reforms: Sequence classification, spatial planning and municipal finance reforms first, establishing the institutional and financial foundations for effective urbanisation management.
2. Introduce Periodic Urban Classification Reviews: Review settlement status at fixed intervals using transparent criteria, satellite imagery, geospatial information and economic activity, rather than relying exclusively on decennial Census exercises.
3. Strengthen the Legal Basis of Planning: Modernise State planning legislation, provide statutory backing to regional plans and require peri-urban zoning to guide development beyond municipal boundaries.
4. Extend Planning and Services to Transitional Settlements: Provide appropriate planning, infrastructure and services before formal urban notification, preventing administrative classification from delaying essential development interventions.
5. Strengthen Municipal Fiscal Capacity: Improve property tax administration, predictable transfers and project preparation capabilities, enabling municipalities to mobilise resources and implement development priorities.
6. Ensure Transparent Municipal Funding: Provide untied grants directly to municipalities through published allocation formulas, improving transparency, financial predictability and local discretion in spending decisions.
7. Build Multi-Level Institutional Coordination: Strengthen cooperation among the Centre, States, municipalities and regional institutions, aligning responsibilities with functional geographical realities.
8. Promote Local Innovation and Performance: Support knowledge-sharing and local experimentation while linking appropriate incentives to measurable governance improvements, encouraging context-specific solutions rather than uniform implementation.

Conclusion

India needs a unified framework aligning classification, planning, finance and governance with changing settlement patterns. Common principles, stronger municipal capacity and regional coordination can help manage growth while respecting federal responsibilities. Planning and essential services must reach transitioning settlements before formal urban recognition, supporting a more inclusive and resilient urban future.

Question for practice:

Discuss the need for a National Urbanisation Policy in India and examine its key objectives and pillars for achieving inclusive and planned urban development.

Source: The Hindu; wri-India