The current budget for 2026-27 signals a renewed commitment to urban development, earmarking INR 1 billion (?1 lakh crore) for the 'Urban Challenge Fund' with the ambitious goal of transforming cities into dynamic growth hubs. This initiative arrives at a crucial juncture, promising a critical boost to decentralised governance – a concept revitalised by the 74th Constitutional Amendment in 1992.

The Fund aims to bolster the financial architecture and capacity of Indian cities, empowering them to effectively leverage market-based instruments. With the Smart Cities Mission now concluded, the Urban Challenge Fund is poised to spearhead a new era of urban rejuvenation and governance.

However, a significant hurdle remains: of 470 municipal corporations, only 36 cities currently hold investment-grade credit ratings, making fundraising an immense challenge. This raises a pertinent question: can this new Fund truly equip urban India to tackle its burgeoning complexities?

Urban areas are far more than just powerful engines of economic growth and innovation; they disproportionately contribute to the national GDP. They are intricate tapestries where cultural exchanges thrive, and new social patterns emerge. Historically, for Marxists, cities have held significant political potential, serving as havens for workers who would become the vanguard of the socialist revolution.

We live in an increasingly urbanised world, with projections indicating that 7 out of 10 people will live in urban areas by 2050. Strikingly, estimates suggest that 90% of this century's urban population increase will occur in developing nations. This surge is driven not only by high birth rates but also by climate-induced migration, both internal and across borders. Asia, in particular, has witnessed an unparalleled pace of urbanisation, with its urban population tripling from 17.5% to a staggering 51.1% since 1950.

Urban India after Independence
In the foundational years following independence, as the Constitution was being drafted, the spotlight largely remained on rural India, leaving its urban counterpart relatively overlooked. Despite this, India's urban population has seen a monumental surge. Current estimates indicate that roughly 36% of the country's population now lives in cities, a figure projected to double to 800 million by 2050.

A stark reality, however, is that nearly half of our urban dwellers reside in slums or informal settlements. These areas are tragically defined by severe overcrowding, structurally unsound housing, cramped spaces with low ceilings, and unsanitary conditions. Access to proper sanitation is often nonexistent, with a lack of household latrines or poorly maintained community facilities, leading to widespread open defecation. Inadequate drainage, open and foul-smelling drains, uncollected garbage and solid waste, and insufficient access to clean, safe drinking water are pervasive issues that residents face daily.

India after Liberalisation: A New Urban Focus
The era of liberalisation injected a powerful impetus into urban areas, finally bringing them into political focus. This shift is evident in the introduction of a series of urban development programs and institutional initiatives, such as the Jawaharlal Nehru Urban Renewal Mission and the Atal Mission for Urban Rejuvenation.

Today, Indian cities have undeniably gained significant economic and political importance. The 74th Constitutional Amendment stands as a historic milestone, designed to strengthen urban governance and planning. While there's now visible competition for resource allocation between rural and urban sectors, this dynamic is often shaped by an institutional framework that still carries a rural bias.

Livable Cities: A Distant Dream?
India is home to approximately 400 cities, yet a recent "Ease of Living Index" from the Ministry of Housing and Urban Affairs highlights a sobering reality: only ten are deemed truly "livable." Cities like Bengaluru, Hyderabad, and Pune lead the pack, lauded for their economic dynamism and cultural vibrancy.

This index, which evaluates factors such as economic opportunity, sustainability, education, and healthcare, paints a stark picture, raising alarms as India strives for the ambitious goal of a 'Viksit Bharat' by 2047.

While the nation has undeniably made significant strides—constructing impressive flyovers, extensive metro lines, and world-class terminals—the fundamental question remains: are our cities genuinely livable for their residents? The daily urban experience for many is often marred by toxic air, dilapidated roads, overflowing drains, and streets that flood with every monsoon.

As far back as 1988, the National Commission on Urbanisation issued a stark warning that urban areas were "in a mess." Decades later, the situation has shown little meaningful improvement, with the quality of potable water, even in major metropolitan centres, remaining far from satisfactory.

A recent McKinsey & Company report, "India's Economic Geography in 2025," further underscores these issues, pointing to the uncontrolled sprawl of existing urban centres, characterised by haphazard growth patterns and a corrosive impact on surrounding regions.

A prevailing view is that the Smart Cities program inadvertently widened the disparity between cities, with already developed centres receiving the lion's share of funding, leading to a scenario in which "smart cities got smarter." The McKinsey report itself highlights this "big city bias," noting how major cities consume a disproportionate amount of natural and financial resources, often at the expense of balanced, planned development. Crucially, the report highlights fundamental failures in urban governance and planning that continue to plague India's urban landscape.

Constitutional Amendment and the Governance Question
The pivotal Constitutional Amendment of 1992 was enacted to revitalise urban governance and strengthen planning systems through greater public participation. However, a recent 2024 report by the Comptroller and Auditor General (CAG) of India has cast a stark light on the concerning state of Urban Local Bodies (ULBs) across 18 states, which collectively serve approximately 241 million residents.

While the Constitutional amendment successfully democratised city governance, its core objective was to forge a truly decentralised system at the urban level. Significantly, the CAG found that despite the 1992 amendment's intent to devolve 18 crucial functions to ULBs, a mere four functions have been fully transferred after three decades—and critically, without the accompanying funds necessary for their execution.

This reflects a profound lack of complete autonomy in 393 ULBs across these 18 states, including Andhra Pradesh, Assam, Haryana, Himachal Pradesh, Odisha, Madhya Pradesh, and Maharashtra. This situation clearly indicates a failure to fully embody the spirit of the amendment.

Empirical studies consistently show that state governments continue to exert control over planning, staffing, budgets, and even minor operational decisions, effectively reducing city governments to mere implementing agencies for the state—a perpetuation of the pre-amendment status quo. Unsurprisingly, this has led to a significant mismatch between responsibility and actual authority.

The CAG report also emphasises a substantial financial gap, revealing a 42% discrepancy between available resources and necessary expenditures. Internal revenue generation remains notably low, with only 32% originating from within the ULBs themselves, leaving them largely dependent on Union and state government funding.

Property tax, a critical potential revenue source, collects only 56% of its potential. The report further indicates that a meagre 29% of expenditures are allocated to developmental and programmatic work, an amount far too insufficient to support urban growth and meaningfully improve citizens' quality of life.

Adding to these woes, Urban Local Bodies suffer from a critical shortage of staff, with most experiencing 37% vacancies in sanctioned positions. This not only causes significant delays in public services but also leads to widespread citizen dissatisfaction.

For genuine citizen participation, the amendment includes provisions for the Constitution of ward committees, ideally comprising all citizens of a ward. Yet, most ULBs have failed to establish these committees. Even those that have done so have often formed ward committees for multiple wards rather than single, ward-based bodies, making effective citizen participation practically impossible.

Furthermore, for metropolitan cities, the amendment mandates the establishment of Metropolitan Planning Committees for integrated planning. Most states have either not constituted these bodies or, if formed, they remain non-functional.

Compounding this issue, large metropolitan centres like Delhi and Kolkata are still burdened by huge parastatal bureaucratic-technical bodies, such as metropolitan development authorities. With the rise of democratic planning bodies, these should logically have been dismantled. Instead, they persist, playing a significant role that leads to an unhappy situation and further fragments planning efforts, silencing the voices of key stakeholders.

Recommendations for a Revitalised Urban India
To ensure the spirit of the Constitutional amendments is upheld, the central government should consider implementing strict measures, potentially including a temporary moratorium on central fund releases for states that fail to comply with these mandates.

The intricate web of utilities within cities necessitates far more effective coordination. State governments must prioritise and facilitate this, encouraging Urban Local Bodies (ULBs) to proactively generate their own resources. This could involve offering incentives, recognising their role as institutions of self-government, and empowering them to innovate their revenue streams.

The pressing challenges of urban pollution and environmental crises demand a fundamental shift in behaviour. We can draw inspiration from history; the cities of the Indus Valley Civilisation set an exemplary standard for cleanliness and civic sense, evidenced by their advanced drainage systems, private bathrooms, impressive water-supply networks, and public baths. Similarly, Kautilya's timeless advice on civic responsibility and municipal regulation remains highly relevant for navigating contemporary urban challenges.

In this interconnected world, there's also much to learn from best practices in urban planning and governance globally. Ultimately, overcoming these hurdles requires strong, committed leadership dedicated to steering our cities forward. Without such vision and resolve, our ambitious quest to achieve a 'Viksit Bharat' by 2047 might well remain at a critical crossroads.