Strong ULBs key to future-proof cities

Revenue and expertise gaps are widening. Empowered cities are our best chance to beat the sprawl.

India’s cities drive more than 60% of the country’s GDP and house 480 million people – a number projected to cross 800 million by 2050, according to the UN’s World Urbanisation Prospects (2018). Yet, the very institutions constitutionally mandated to govern these spaces – Urban Local Bodies (ULBs) – operate with revenues amounting to just 0.8% of GDP. By contrast, municipalities in Brazil and South Africa command 6-7% of GDP, according to World Bank and Reserve Bank of India (RBI) data.

The 74th Constitutional Amendment, passed more than three decades ago, promised decentralised, empowered city governments. In practice, however, most ULBs lack financial autonomy, skilled personnel, and authority over core urban services.

A worrying trend is the weakening of democracy at the city level. Since 2020, over 15 states have postponed municipal elections. Tamil Nadu went more than ten years without one, from 2011 to 2022. Madhya Pradesh, Odisha, and Andhra Pradesh have also delayed elections, citing delimitation disputes, reservation challenges, and legal conflicts. In the absence of timely elections, citizens face governance by administrators rather than elected representatives, undermining the core intent of the 74th Amendment.

According to the RBI’s State Finances Report (2023), municipal revenues remain stuck at 0.8% of GDP, among the lowest globally. Most ULBs rely heavily on property taxes, but outdated valuation methods and poor collection systems keep revenues stagnant.

The mismatch between functions and funds is stark. As compiled from NITI Aayog (2019) and RBI (2023) reports, solid waste management forms 22% of ULB responsibilities but gets only 9% of the budgets. Public transport accounts for 18% of the functions but just 5% of the spending. While urban planning covers 15% of the responsibilities, it receives barely 4% of the funds. Water supply, health, sanitation, and education, too, remain underfunded relative to their assigned responsibilities.

This structural funding gap prevents even basic services like waste collection and clean water from being delivered effectively, let alone transformative city planning. Municipal finance systems remain tethered to outdated revenue streams while urban responsibilities have expanded dramatically over the years.

Weak institutional capacity compounds the financial crunch. A 2022 Indian Institute for Human Settlements report found that most smaller towns do not have a single qualified town planner. More than a third of technical posts in ULBs remain vacant, as noted in NITI Aayog’s Report on Urban Local Bodies (2019). Unsurprisingly, an audit of 393 ULBs across 18 states revealed that less than half of the planned projects were completed on time.

Rise of parastatals

Urban governance has increasingly shifted to parastatal entities such as development authorities, industrial development corporations, and smart city Special Purpose Vehicles (SPVs). These bodies report directly to state governments and often bypass city councils and mayors. While they may deliver projects, they erode democratic accountability by sidelining elected representatives. The result is governance shaped by “invisible hands” with little direct accountability to residents.

These bodies have often emerged to fill critical service gaps where local administrations lack trained personnel or technical resources. However, this workaround, while addressing immediate needs, risks creating parallel systems that are difficult to integrate into broader urban development frameworks, making long-term planning and coordination more challenging.

India will add another 416 million urban residents by 2050. Cities must lead economic growth, climate resilience, and innovation. Yet, without empowered ULBs, inequalities will deepen, infrastructure will lag, and global competitiveness will erode. Coordinated planning reduces service overlaps and ensures that funds are allocated to areas with measurable impact, like expanding access to clean drinking water, improving waste management systems, or building resilient transport networks that reduce commute times and emissions. Efficient municipal governments are central to India’s development story.

ULBs could be empowered by 1) mandating timely municipal elections, ending chronic administrative delays; 2) modernising property tax systems and implementing formula-based devolution, as recommended by the 15th Finance Commission; 3) launching State Urban Services to professionalise
municipal staffing, and 4) limiting parastatal powers in areas constitutionally assigned to ULBs, ensuring governance remains representative and accountable.

India’s urban future cannot be defined by GDP growth alone. It will be judged by lit streets, clean drains, efficient public transport, and resilient neighbourhoods. Our cities, larger than many countries in population, deserve effective and accountable governance.

The choice is clear: empower city governments now, or risk watching Indian cities buckle under the pressures of a rapidly urbanising century.

(Basavaraju is executive director, Grassroots Research and Advocacy Movement; Alok is programme manager – instructional delivery, Rishihood University)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.