India’s cities are set to become the country’s biggest growth engines, but keeping them running will require a massive financial overhaul. A new FICCI-EY report estimates that urban India will require $2.4 trillion by 2050 to become climate-resilient and low-carbon, even as municipal corporations continue to struggle with limited revenue generation and access to capital.The report highlighted that only 20 municipal corporations have accessed capital markets so far, collectively raising around $476 million, pointing to the large financing gap that continues to limit urban development.With urban areas already contributing more than 60% of India’s GDP while housing nearly one-third of the country’s population, the report stressed the need for stronger financial systems and investment-ready cities.However, municipal corporations collectively generate revenues equivalent to only around 0.6% of GDP, restricting their ability to independently finance infrastructure projects and public services.Growth accelerates, but infrastructure needs unfinishedThe report estimated that India will need around $840 billion in urban infrastructure investments over the next 15 years, translating into nearly $55 billion every year.A large part of this requirement remains unmet, with nearly 70% of the urban infrastructure needed by 2047 yet to be built, the report said.India’s urban population is expected to rise to nearly 600 million by 2036, with cities contributing around 70% of GDP. By 2050, the urban population is projected to reach 877 million and account for nearly 75% of the country’s economic output.The report said that financing has emerged as the key challenge in achieving the government’s Viksit Bharat 2047 vision, rather than infrastructure creation alone.Cities need to become investment-readyThe report called for a shift in the way urban development is approached, with cities moving beyond basic service delivery and becoming engines of economic growth.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 urbanisation would require cities to focus on competitiveness, governance and financial preparedness.“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 proposed six strategic shifts to strengthen India’s urban ecosystem. 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.Funds expected to unlock more investmentsThe report identified the Union government’s Rs 1 lakh crore Urban Challenge Fund as an important move towards making cities financially self-reliant.The fund requires urban local bodies to mobilise 50% of project costs through capital markets and is expected to catalyse nearly Rs 4 lakh crore in investments.The report said improving access to capital markets and strengthening municipal finances would be important steps in enabling cities to meet future infrastructure requirements.Top cities drive GDP, smaller urban centres underusedThe report highlighted the uneven spread of economic activity across urban India. While the country’s top 10 cities contribute nearly 30% of GDP, many Tier-II and Tier-III cities remain underutilised despite accommodating a large share of India’s urban population.To address this imbalance, the report recommended developing a polycentric urban growth model, where multiple cities grow as economic centres and are connected through economic corridors and the PM Gati Shakti initiative.This approach, it said, could help unlock the economic potential of emerging cities and create a more balanced urban growth pattern.Urban schemes lay foundationThe report noted that India has already built a foundation for urban transformation through several flagship 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 journey, 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.
