India's cities need USD 2.4 trillion investment by 2050, but municipal corporations raise only a fraction: Report
New Delhi, July 28
India's cities will require an estimated USD 2.4 trillion in investments by 2050 to become climate-resilient and low-carbon, but municipal corporations have so far mobilised only a fraction of the required capital, according to a joint report released by FICCI and EY on Tuesday.
The report said that only 20 municipal corporations have accessed capital markets to date, collectively raising about USD 476 million, highlighting the significant financing gap facing India's urban development.
According to the report, urban areas currently contribute more than 60 per cent of India's GDP while housing nearly one-third of the country's population.
However, municipal corporations collectively generate revenues equivalent to only about 0.6 per cent of GDP, limiting their ability to finance infrastructure and public services.
The report estimates that India will require around USD 840 billion in urban infrastructure investments over the next 15 years, translating into nearly USD 55 billion annually. It also noted that nearly 70 per cent of the urban infrastructure required by 2047 has yet to be built.
India's urban population is projected to rise to nearly 600 million by 2036, contributing around 70 per cent of GDP. By 2050, the urban population is expected to reach 877 million, accounting for nearly 75 per cent of the country's economic output, underscoring the need for substantial investments in infrastructure and governance.
The report said financing, rather than infrastructure creation itself, has emerged as the key challenge in achieving the government's Viksit Bharat 2047 vision.
Raj Menda, Chairman of the FICCI Committee on Urban Development and Real Estate and Chairman of the Supervisory Board at RMZ, said India's next phase of urban development should focus on building economically competitive and investment-ready cities.
"India's next phase of urban development must move beyond infrastructure creation to building economically competitive, investment-ready cities. Strong governance, innovative financing and integrated planning will be critical to unlocking the full potential of our cities and accelerating India's journey towards Viksit Bharat 2047," he said.
The report described the Union government's Rs 1 lakh crore Urban Challenge Fund as an important step towards making cities financially self-reliant. The fund requires urban local bodies to mobilise 50 per cent of project costs from capital markets and is expected to catalyse nearly Rs 4 lakh crore in investments.
To strengthen urban development, the report proposed six strategic shifts. These include moving from service delivery to economic leadership, promoting a network of growth cities instead of concentrating development in a few metros, transforming cities into investment-ready entities, focusing on economic competitiveness rather than only infrastructure creation, using data as strategic economic intelligence, and building climate-resilient cities.
The report also highlighted the uneven distribution of economic activity across urban India. While the country's top 10 cities contribute nearly 30 per cent of GDP, many Tier-II and Tier-III cities remain underutilised despite accommodating a large share of the urban population.
It recommended developing a polycentric urban growth model linked through economic corridors and the PM Gati Shakti initiative to unlock the economic potential of these emerging cities.
The report noted that India has already laid a strong foundation through flagship urban development programmes. More than 8,000 projects worth over Rs 1.64 lakh crore have been implemented under the Smart Cities Mission, while Rs 2.7 lakh crore has been committed under AMRUT across nearly 500 cities. In addition, 1.25 crore houses have been sanctioned under Pradhan Mantri Awas Yojana (Urban).
Emphasising the importance of cities in India's long-term growth story, Menda said, "The success of Viksit Bharat 2047 will depend on the success of India's cities."
He added that cities with transparent financial systems, strong governance and investment-ready balance sheets would be better placed to attract long-term capital and sustain economic growth.
— ANI
Reader Comments
As someone who moved from the US to Bangalore for work, I see the potential and the frustration. The Urban Challenge Fund requiring 50% from capital markets is smart - it forces accountability. But will Tier-2 cities like Indore or Vizag get the same attention as Mumbai or Delhi? That polycentric model sounds good on paper.
Even with Rs 2.7 lakh crore under AMRUT and Smart Cities Mission, I don't see much change on ground level in my colony. The problem is corruption and inefficiency at the local level. We need to focus on building climate-resilient infrastructure - last year's floods in Chennai showed what happens when you ignore that. Jaane kya hoga in desh ka.
I appreciate the report's focus on moving from 'service delivery to economic leadership'. Our cities have become dumping grounds rather than engines of growth. The 1.25 crore houses under PM Awas Yojana is impressive, but what about transit-oriented development? People commute 3-4 hours daily in metros - that's not sustainable. 🏙️
Asking municipal corporations to raise 50% from capital markets is unrealistic when most can't even collect property tax properly. My local ward office has 30% tax defaulters. First, fix the leakage - digitize records, use GIS mapping, penalize the rich who evade taxes in posh areas. Then we talk about billion-dollar bonds.
The report says Tier-2 and Tier-3 cities
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.