E-Paper
Integrated approach key to growth of cities, tells Economic Survey 2025-26
With an integrated approach, India’s cities can unlock growth by fixing distorted land markets, boosting density through infrastructure investments, and shifting from vehicle-centric to people-centric mobility planning, Economic Survey 2025-26 said
With an integrated approach, India’s cities can unlock growth by fixing distorted land markets, boosting density through infrastructure investments, and shifting from vehicle-centric to people-centric mobility planning, Economic Survey 2025-26, tabled in Parliament on Thursday said.
According to the 2011 census, India is 31% urban. However, the economic survey suggested that India is far more urban in economic and functional terms, noting consensus on measuring urbanisation using data on mobility, labour markets, density, built-up areas, and night-time light.
The survey also noted India’s urban population has expanded rapidly in absolute terms, with large metropolitan regions such as Mumbai, Delhi, Bengaluru, Chennai, and Hyderabad now ranking among the world’s largest urban agglomerations by population. “However, population scale has not translated into proportionate gains in urban productivity, liveability, or global economic influence.” The survey also mentioned a World Bank estimate that by 2036, India’s towns and cities will be home to 600 million people, 40% of the population, contributing almost 70% to GDP.
Identifying land, housing, mobility, sanitation, and waste management as the “binding constraints” limiting the benefits of urbanisation in India, the survey called for solutions such as scaling city bus fleets and digitising operations to improve service reliability. To address last-mile journeys, it recommends legalising and standardising shared autos, e-rickshaws, minibuses, and bike taxis through simple permits, station pickup bays, and app integration. To unclog the roads, it recommended “targeted congestion pricing” in dense business districts.
As a major reform, the survey pushed for unlocking “dead capital” trapped in a restrictive land-use regime. It flagged low floor space index (FSI), fragmented markets, recommending holistic reform of development control regulations and a shift from piecemeal relaxations to city-wide density reform.
It urged states and cities to adopt MoHUA’s (ministry of housing and urban affairs) Transit-Oriented Development (TOD) framework to enable compact, vertical growth around transit corridors. Land record and titling reform is the second change, the survey called for, backed by digitised land records citing state-level systems such as Telangana’s Bhu Bharati and Karnataka’s Bhu Suraksha.
The survey also noted in India, there is an inherent contradiction in urban policy and expected outcomes. “Cities are expected to deliver growth, productivity, and jobs, yet policy is designed to restrain density, fragment authority, and ration urban land.” However, it cautioned that higher density cannot come without parallel investment in infrastructure. It warned against “decongestion” strategies that push cities into outward sprawl and instead recommends building transit, water and sanitation capacity to support compact high-density urbanisation.
“Metro rail, flyovers, and expressways are built without parallel land-use reform, housing supply, or skill clustering. Transport systems are asked to compensate for planning failures rather than enable density. The result is capital-intensive infrastructure with suboptimal economic returns. Metro systems move people, but they do not always raise productivity because jobs, housing, and transport remain misaligned. Infrastructure without institutional reform is concrete without consequence,” the survey said.
On housing, the survey backed continued fiscal and financial incentives, including tax benefits, GST relief, priority-sector lending and infrastructure status for housing. It called for scaling up PMAY-Urban, noting that 12.06 million houses have been sanctioned and 9.6 million completed. At the same time, it warned against pushing affordable housing to poorly connected city peripheries, stressing integration with mass transit, employment hubs and civic amenities.
The survey proposed a rule-based planning regime to unlock housing supply. Every city with over a million population should prepare a statutory 20-year city spatial and economic plan covering transport networks, annual housing supply targets and land-value capture frameworks. Discretionary FSI exemptions should be replaced with published, transit-linked norms.
In mobility, the survey argued that metro systems must be paired with TOD to avoid under-utilised ridership and isolated engineering projects. It called for a shift from vehicle-centric planning to prioritising public transport, demand management, pedestrian infrastructure and parking management. It recommended converting 10-15% of city streets into pedestrian-first or low-traffic zones, backed by mandatory street design codes and pilot “weekend streets”.
The survey noted that despite the PM e-bus Sewa to strengthen city bus operations with 10,000 e-buses, gaps in mass transit services persist. City-level indicators reveal a capacity shortfall in buses. MoHUA recommends 40-60 buses per 1,00,000 people. Yet, many cities have far fewer. Nationally, only about 47,650 buses serve its urban residents. Nearly 61% of these are concentrated in just nine megacities. Due to the layout of urban roads, low bus availability combined with high private vehicle use reduces person throughput per lane kilometre, leading to congestion and longer door-to-door travel times.
For informal settlements, the survey favoured in-situ slum upgrading with secure tenure, infrastructure and incremental formalisation, alongside formal vending zones under the Street Vendors Act and PM-SVANidhi.
Urban sanitation, waste management, and water systems must shift from coverage-led expansion to circular, resource-efficient systems, the survey said.
It added that these physical investments will deliver their full dividend only if accompanied by stronger metropolitan governance, predictable enforcement, and a credible civic compact that aligns incentives between citizens and the state. “Physical investments will deliver their full dividend only if accompanied by stronger metropolitan governance, predictable enforcement, and a credible civic compact that aligns incentives between citizens and the state.”
Economic Survey 2025-26 recommended that infrastructure funding should be conditional on city-climate plans, ensuring that drains, pumping stations, roads, and public spaces are designed for climatic conditions expected in the future due to climate change and not historical averages. Similarly, it said development control regulations can require minimum on-site water retention and reuse capacities, reducing pressure on municipal networks. Further it advocated, climate-responsive building codes—including ventilation norms, shading, reflective materials, and green roofs— that can significantly lower indoor temperatures and energy demand at low cost. “Use of local building material and local designs must be actively encouraged since they help in natural heat reduction and geophysical adjustments….”
