Economic Survey identifies urban challenges for India’s growth story

The Economic Survey of India-2026, tabled by Finance Minister Nirmala Sitharaman in Parliament on Thursday, identified urban infrastructure, governance and transport, as few of the factors hobbling the India growth story.

It makes a case for decentralisation and more autonomy to urban civic bodies citing the present state of accountability deficit, administrative lacunae and fragmented functioning. The survey cites housing, land, mobility, sanitation and waste management as key concerns that are holding back India’s growth.

The conversation about livability in cities like Mumbai, Delhi, Bengaluru, Chennai, and Hyderabad finds a place in the survey: “Population scale has not translated proportionately into urban productivity, liveability, or global economic influence.”

Congestion tax

The Economic Survey put a positive spin on congestion tax by citing the example of London: “By starting with a modest £5 fee and visibly linking the charge to improved bus and underground services, the city demonstrated that the policy was a tool for service enhancement rather than a simple revenue grab.”

It uses this information in the backdrop of commuter woes. The survey uses a Centre for Science and Environment (CSE) report to put a cost to urban congestion that has become the bane of Indian cities. Using the CSE report, it pegs the cost of congestion on an unskilled worker between ₹7,200 – ₹19,600 per year in Delhi.

“Nationally, only about 47,650 buses serve its urban residents. Nearly 61% of these are concentrated in just nine megacities,” reveals the document citing it as a factor driving “private vehicle use leading to congestion and its resulting ills, as citizens compete for limited road space using geometrically inefficient transport modes.”

Uneven land use policy

The survey identifies irrational land use rules for driving up the cost of housing as well as expanding the cities horizontally. “When the FSI is low, settlements are incentivised to expand horizontally, driving up average land cost and increasing infrastructure delivery costs per unit of housing or commercial space. This limits housing supply and raises prices relative to incomes,” says the document.

It identifies Chennai as an outlier with a new policy push: “The Chennai Metropolitan Development Authority (CMDA), in drafting its third master plan, is reportedly considering a higher FSI in key zones, mixed-use development, and phased upgrades to support compact and vertical growth across the city”.

Interestingly, Hyderabad too has chosen the path of unlimited FSI in certain parts of the city but it is not linked to a holistic policy.

Governance issues

Hinting at governance in New York and other US cities, the survey document points out: “Indian cities raise less than 0.6% of GDP in own-source revenues, borrow negligibly, and depend overwhelmingly on inter-governmental transfers.

One of the central structural constraints is the institutional design of Indian cities. Unlike global cities that operate with significant administrative and fiscal autonomy, Indian cities remain embedded within multi-layered governance structures.” Incidentally, Hyderabad emerges as a city with one of highest issues of municipal bonds.

Among safe urban mobility initiative, the Telangana government initiative of SHE Teams gets the requisite due that is worth emulating by other Indian cities: “Key policy interventions could include enhancing visible women police presence for patrols in high traffic and pedestrian areas, especially during off-peak hours (like Kochi’s Women Police Control Room vans and Hyderabad’s SHE Teams).”

The Survey invokes Sir Mark Tully’s lecture in Chennai for things to change: “If India is to truly fulfill its potential, it must move from a ‘Ruler’s Raj’ to a ‘Citizen’s Raj’.”