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. The report revealed 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. As reported by Business Standard, urban areas currently contribute more than 60 per cent of India's GDP while housing nearly one-third of the country's population, but 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 emphasized that financing, rather than infrastructure creation itself, has emerged as the key challenge in achieving the government's Viksit Bharat 2047 vision, with city balance sheets failing to keep pace with their growing economic role.
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 emphasized that while India's top 10 cities contribute nearly 30 per cent of GDP, 36 mid-to-large cities and about 450 smaller centres remain underleveraged despite accommodating a larger share of the urban population, highlighting the need for more balanced urban development across the country.
The report described the Union government's Rs 1 lakh crore Urban Challenge Fund as an important step towards making cities financially self-reliant. Under the scheme, cities are expected to mobilise 50 per cent of project costs through capital markets, which could catalyse nearly Rs 4 lakh crore in investments. To strengthen urban development, the report proposed six strategic shifts including building investment-ready cities with stronger financial management, improving governance and institutional capacity, using data-driven planning to support decision-making, expanding economic growth beyond major metropolitan areas by developing Tier-II and Tier-III cities, enhancing the competitiveness of urban centres, and promoting climate-resilient and sustainable development. The report noted that the fund signals a shift towards making Indian cities financeable and capable of attracting private and institutional capital, with the idea to reduce dependence on government grants while encouraging civic bodies to improve their financial health and access private capital.
The report highlighted 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). However, the report noted that 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. The report emphasized that strong governance, innovative financing and integrated planning will be critical to unlocking the full potential of cities and accelerating India's journey towards Viksit Bharat 2047, with urban transformation ultimately depending on stronger municipal finances, better governance, and the ability of cities to attract sustained long-term investment.
Emphasising the importance of cities in India's long-term growth story, Raj Menda, Chairman of the FICCI Committee on Urban Development and Real Estate and Chairman of the Supervisory Board at RMZ, 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. The report 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, with tier-II and tier-III cities designated as regional growth hubs. The report also highlighted the uneven distribution of economic activity across urban India, with the top 10 cities contributing nearly 30 per cent of GDP while many smaller cities remain underutilised despite accommodating a large share of the urban population. The prescription rests on a decade of delivery, with the cities that first build transparent accounts and investment-ready balance sheets positioned to compound while others find that capital, on capital's terms, goes elsewhere.
