Urban Governance in India: Emerging Challenges and New Approaches

The pace and growth of urbanization in India pose enormous challenges to urban governance. The institutional features in a country like India facilitate the cities to deliver a better quality of life to its citizens and generate an environment that is capable of sustaining rapid growth. Though planned urbanization is needed for the industry and service sector, the lack of empowerment of cities is constraining their ability to translate the urban development agenda into action. Institutional reforms are crucial for reaching out to the private sector for sharing the financing burden and ensuring that it results in improved service delivery. Effective Urban Governance highlights the primary role of Central Government to provide strategic leadership, some funding, and assistance in building capacity for urban planning and management; and the role of state governments in being the principal players for creating an environment in which city governments can discharge the responsibilities assigned to them by the constitution.


“Municipal governance” has once again taken center stage in Indian political society. Earlier, the British used their administrative powers to benefit their own people while ignoring the needs of the native population. This led to the emergence of nationalist feelings that ultimately led to the demand for local-self/municipal government, which aimed at ensuring that the common man should be the beneficiary of the services being provided. Under the rule of Pt. Jawaharlal Nehru, municipal law was introduced for the first time with the concept of ’cabinet form of government’ through the Mayor-in-Council model in the ULBs. Also, the tenure of the Mayor was increased from one year to five years so as to improve the quality of governance.

Municipal Governance in India exists since 1687 with the formation of Madras Municipal Corporation and then Calcutta and Bombay Municipal Corporation in 1726. In the early part of the nineteenth century, almost all towns in India had experienced some form of municipal Governance. In 1882 Lord Ripon’s resolution of local self-government laid the democratic forms of municipal governance in India. In 1919 Government of India act incorporated the need of the resolution and the powers of democratically elected government were formulated. In 1935 Government of India act brought local government under the purview of the state or provincial government and specific powers were given.

In 1992, a major step towards the decentralization and empowerment of local governments in India took place with the enactment of the 74th Constitutional Amendment Act. The Amendment calls for greater responsibilities and authorities for local governments by recognizing it as a third-tier government. Some of the important aspects include:

  • Planning for economic and social development and role of municipal government in the implementation of urban poverty alleviation projects
  • Increased responsibility for urban planning at the district and metropolitan levels
  • Greater authority to mobilize and using of resources

The 74th Constitutional Amendment mandated that state governments transfer to local governments a set of specified functions under the 12th Schedule, assigning to them the responsibility for functions such as urban planning, including town planning; regulation of land use and construction of buildings, roads, and bridges; the provision of water; public health; and sanitation and solid waste management. As a result, accountability now rests with the urban local bodies but it is not backed by either adequate finances or the capacity for planning and management. State governments have an important role to play in transferring functions, funds, and functionaries, providing an enabling environment through legislative and institutional reform. The Government of India can only provide strategic leadership.

Urban Governance

In modern times, despite being constitutionally empowered, India’s municipal government lacks mechanisms to provide sufficient housing, healthcare, sanitation, and livelihood, largely due to a paucity of funds, which it is able to generate only through property tax and license fees. Municipal governments certainly have their task cut out as they continue to witnesses a consistent influx of people moving from villages to the cities to earn a better living.

Ambiguity with respect to the provisions under the 74th CAA

A number of functions under the 12th Schedule have been devolved by many but not all state governments over the past 2 decades or so. However, a number of very important functions such as town planning continue to be held by most state governments (Panagariya, 2014). In addition, some states include a peculiar provision in their municipal legislation stipulating that specific functions may be assigned to the local governments by the state government from time to time, thereby precluding unambiguous assignment. There has also been little action on transferring functionaries to the local governments. Municipal functionaries in most cases are employees of the state governments and are posted to individual cities.

State Finance Commission

On funding, the 74th Constitutional Amendment had required that state finance commissions be set up by the state governments to spell out the principles for devolving a part of the revenue of the state government to local governments (Mathur & Peterson, 2006). But, on the contrary, state finance commissions did not meet the standards set by the Central Finance Commission. They have not challenged the state level political resistance to devolve and urban local governments have remained hamstrung by the lack of funds and are having to function with unfunded mandates.

In addition to the lack of financial devolution, there is a lack of financial autonomy both in mobilizing resources and in setting user charges to cover costs (Panagariya, 2014). Property tax rates and exemptions are typically set by the state government; this is a major source of revenue for the local government, and the urban local bodies are at the mercy of the state government. There have been instances of exemption limits raised and/or tax rates lowered before state elections; for example, in Punjab, Haryana, and Rajasthan. In addition to the need for reforming the property tax regime through setting up a property tax board and better methods of assessment, valuation, and collection of property tax with the help of geographic information systems, there is a general need to add a municipal finance list in the constitution that should specify taxes that are exclusively the domain of local governments.

The Role of People’s Representatives and Citizens

A significant development in India’s structural transformation is that metropolitan regions are being created by default and not by design. The Constitution of India provides considerable discretion to state governments in determining the administrative boundaries of metropolitan regions, and these have not typically been set keeping in mind the need to create a unified market forging strong economic linkages between the core city and the periphery of the region. The constitution also requires that metropolitan planning committees (MPCs) and district planning committees (DPCs) prepare development plans for their respective areas, although there is lack of clarity on how these plans will fit into a larger picture and how they will be financed. Though MPCs and DPCs have been formed in some states, even there they have not forged links with city planning authorities. They have also not been effective as regional planning agencies (Sivaramakrishnan, 2015). It is imperative to say that there is sheer lack of metropolitan planning and governance.

Emphasis on Economic Development and Social Justice

The existing distribution of power in the Indian political system is such that urban population is underrepresented in both national and state legislatures. The political economy of development in India has remained dominantly concerned with the development of rural areas implicitly assuming that urban areas can take care of themselves. Quite apart from the fact that the urban areas have been generally neglected in carving out a development strategy for the economy, the emerging urban areas have also been denied the basic statutory framework for demanding governance.

Political empowerment is also weakened by infrequent elections for local governments and limited tenures of mayors. More important, the executive power by and large is vested in municipal commissioners, who are appointees of state governments. A suggestion for direct elections of mayors is often put forth as an instrument for better governance. As of now, only very few states such as Tamil Nadu, Rajasthan, Uttar Pradesh, and Himachal Pradesh currently have directly elected mayors. The functioning of a directly elected mayor in a parliamentary system poses a number of challenges. Where the council of locally elected representatives is controlled by a political party antagonistic to the party from which the directly elected mayor comes, the decision making can become tortuous, although the council could be a counterbalance to the mayoral position. However, such checks and balances become meaningless because in most states the mayor has virtually no executive powers. Where powers are vested in the mayor-in-council, an indirectly elected mayor may well be in a better position to ensure smoother functioning. More important than the mode of electing the mayor is the issue of the powers of the city government relative to the state government. The enormity of these challenges of governance can be better appreciated when juxtaposed with the fast-changing urban scenario in the rapidly growing Indian economy.

Related: Reasons why Urban Planning is important for cities, Climate Change Action in Asia

General Issues

There is a current re-shaping of narratives within the national government to make local governance effective. It is realized that deficit in the delivery of urban services results in chaos, which forms the basis for citizens doubting the functioning of the local government.

In most of the Indian cases, it is the state bureaucrats who control civic agencies that results in constant erosion of the functional domain of these bodies, irrespective of the 74th Constitutional Amendment Act, which tried to institutionalize them. the devolution of funds to the Urban Local Bodies (ULBs) has improved the finances of these bodies. But there is a yawning gap between what is required and what is mobilized.

No one is in charge of the cities or accountable to the citizens for the delivery of services. Even before worrying about tax collection shares, the fundamentals need to be reworked by looking at the entire institutional, legal and financial framework of the municipal government.

The above said issues can be together clubbed and generally explained as follows:

  • Absence of coordination among public organizations undertaking various civic and infrastructure related functions in cities.
  • Lack of an adaptive and flexible planning process in response to the economic forces that drive demand for land and land use.
  • The experience of metropolitan planning committees (MPCs) has been disappointing because of lack of autonomy, executive power, finances and functionaries.
  • Fragmentation of the urban portfolio across ministries at the centre. Private vehicles and radio taxis falls under the purview of the ministry of road transport and highways, while waterways come under the ministry of shipping.
  • Mayor holds largely a ceremonial position, while the powers are vested in the municipal commissioner.
  • Institutional defragmentation, whereby multiple agencies often have overlapping roles, are run by officials who are not accountable to citizens.
  • The unchecked proliferation of slums, steady deterioration of city infrastructure and failure of municipal corporations to live up to the challenges — like urban flooding in Mumbai, dengue in Delhi and cratered roads in Bengaluru.
  • India has one planner per four lakh citizens as against 48 in the United States and 148 in the United Kingdom.
  • Poor urban planning can cost a country 3% of its GDP
  • Heavy rain and flooding in cities like Mumbai have brought the city to a halt and also cost lives.
  • Such disasters of urban flooding are bound to come owing to the kind of haphazard development projects carried out by builders in many cities.
  • Common problems that impact the functioning of most Indian cities are multiple jurisdictions, weak revenue base and human resource capacity deficit.

Unless institutional reforms are put in place to address these challenges effectively, the process of urbanization cannot be taken forward to support the twin objectives of improving the quality of life of India’s rapidly growing urban population and transforming Indian cities to play their role as engines of growth in India’s current stage of development. We need to understand and appreciate the facts that, municipalities are the closest governance system to citizens directly impacting their lives; They are responsible for improving the quality of life in our cities; and India is one of the few countries to have a separate ministry for housing and urban poverty alleviation and for urban development.

Related: Scope & Purpose of Perspective Plan as per UDPFI guidelines, Vote Bank Politics, Lobbying and Favoritism: Discrepancies of Slum Formation and Existence

A way forward

As the metropolitan regions around these cities are being highly integrated with the economic and financial global economy and the cities aspire to become globally competitive and, at the same time, expansion of the city boundaries and surrounding large villages grow into towns in situ, these forces call for urban planning to promote and accommodate rapid growth and inclusive development. In Venables’ (2009) words,

Because new urban centres are hard to establish, existing cities grow well beyond their optimum scale, possibly to the point at which, at the margin, diseconomies such as congestion outweigh positive economies of scale. Such an outcome is clearly inefficient. The policy question is, how should the growth of new cities or the deconcentrating of existing ones be promoted? (p. 58)

It is important to develop new cities wherever growth potential of a region so warrants. This is certainly important in the long run. Thus, since the Western Dedicated Freight Corridor from Delhi to Mumbai is expected to be completed by the end of 2017, and the Delhi– Mumbai Industrial Corridor is being planned for manufacturing-led urbanization, a number of greenfield cities are being planned along the corridor. For example, Amaravati, the upcoming capital of Andhra Pradesh, is a greenfield city that can be a model of urban planning and management (Government of Andhra Pradesh, 2016). But there is no denying that for the 8,000 or so existing cities and towns of India, urban development and urban rejuvenation has to involve a significantly better service delivery and improved governance, together with better and expanded urban infrastructure.

Planned urbanization is needed as much for the industry and services sectors as it is for rural rejuvenation because it fosters the synergy between rural and urban sectors. For example, the quantity and quality of water available for agriculture is significantly affected by water use in urban areas. Similarly, modernization of the retail sector in urban areas including foreign direct investment encourages investments in logistics and back-end infrastructure, offering opportunities for high-value agriculture.

Though investing in urban infrastructure to bridge the infrastructure investment deficit and upgrading its quality is very important, the analysis clearly suggests that institutional reforms are crucial both for reaching out to the private sector for sharing the financing burden of infrastructure and for ensuring that the expansion of infrastructure results in improved service delivery.

The national urban missions have raised great expectations. But as JNNURM showed, it is when state governments are proactive in coming forth with necessary legislative reforms, institutional framework for financial and regulatory support, financial devolution, and helping build capacity at the urban local government level that the impact can be seen in significant improvement in service delivery (Frug & Barron, 2008). To the extent that these missions provide strategic focus on urban planning and management and succeed in nudging the state governments into action to decentralize, devolve, and build capacity at the urban local government level, they will make a difference. The technology focus of the national missions seems to have caught the fancy of many. However, the technology focus must be supplemented with heavy emphasis on institutional reforms if Indian cities are to deliver a better quality of life and improve the investment climate for business.

The basic Approaches for change are listed below:

  • Coordination and cooperation among all public authorities concerned needs to take place not just in response to a crisis but as a regular and routine feature of the governance set-up. This requires a single coordinating agency.
  • The agency needs to have representatives from other public organisations and domain experts from outside the public sphere.
  • It needs to be accountable to citizens for the functions in the region.
  • Successful transport planning and other functions managed at the metropolitan level in London and New York could be useful case studies.
  • Necessary checks and accountability mechanisms of public officials.
  • Reform the 74th Constitutional Amendment to empower city governments and move to a system of a directly elected mayor.
  • Establish a National Urban Finance Corporation of India to fund urban infrastructure projects.
  • Set up the regulatory architecture required to facilitate efficient and effective urban services delivery.
  • Revitalize the role of the State Finance Commissions to bolster municipal finances.
  • Deepen citizen engagement in cities to drive change across localities.
  • The partnership between government, community and NGO can lead to transparency in urban governance.
  • Introduction of a report card system for rating the service dispensing efficiency of public utilities in the cities.
  • Constitute a metropolitan planning committee anchored by municipal elected representatives for formulating city’s metropolitan plan to address the deficiencies in city planning.
  • Strengthening taxation base, a better-developed mechanism for devolution of funds for ULBs from state.
  • Rurban Planning, which creates growth at micro-level and impedes rural-to-urban migration


In order to address the challenges in the Urban Governance in India, we need an amendment to the 74th Constitution Amendment Act by way of including a definitive list of resources for the local bodies which would empower them to deliver services. Secondly, we need strengthening of Area Sabhas by empowering them financially. As investments in industry and services look for urban space to garner economies of agglomeration, both market forces and the government have to play an important role in generating these economies. We need an urban forum in cities which can influence national or state policies on urban development while putting cities at the core of planning. We also need to bridge the divide between the bureaucrats and the Ministries, so as to facilitate better functioning of the municipalities. In order to reap the benefits of demographic dividend, the Indian government should facilitate the voice of the people in the cities by making them a part of political process and debate, which ultimately impacts their daily life.


Ahluwalia, I. J. (2014a). Improving our cities through better governance. London, England: LSE Cities.

Ahluwalia, I. J. (2017). Urban governance in India. New Delhi, India. Journal of Urban Affairs.

Datta, A. (2001). The Challenge of Urban Governance Ch. 3: Institutional Aspects of Urban Governance. The World Bank Development Studies. Washington DC. WBI.

Insights Mind Maps: Urban Governance in India