A Tale of Our Cities

I loved reading this article by Miheer Karandikar, given my long-held conviction that India simply cannot develop without developing her cities. Urban India is where the action is. Consider these collection of statistics that Miheer cites: our cities house 36% of the population and generate 60% of our GDP, but municipal corporations are responsible for a measly 0.6% of the GDP as revenue receipts. That’s just nuts. And it gets worse—own-source revenue for municipal corporations covers only 30% of their total expenditure. Property taxes, a critical source of revenue for cities worldwide, contribute a laughably low 0.12% of GDP in India. How are we supposed to build thriving urban spaces with numbers like these?

This article rightly points out several of these challenges, and I want to add three key issues of emphasis, not to disagree but to push the conversation further:

First, meaningful decentralization must happen. The 73rd and 74th Constitutional Amendments were supposed to herald a new era for local governance in India, but in reality, they’ve made little difference on the ground. Their operationalization has been both a sham and a matter of shame. Overt and deliberate centralization of political power is killing our cities, and by extension, our entire country. We keep centralizing decisions that should be taken by those who know the cities best: the people who live and work there. The result? Our mayors, who should be the key leaders in urban governance, are often powerless and have little authority. We need to make the mayor great again!

But this is only part of the story. Giving municipal corporations a constitutional status and establishing a structure for organizing urban governance is important, but equally crucial is financial empowerment. Miheer makes this point well—and I want to underscore it. Cities need the power to raise their own revenues and, just as importantly, to spend those revenues effectively. Imagine trying to run a complex city with little financial autonomy, constantly dependent on state or central government for funds. It’s not just inefficient—it’s demoralizing. If municipal corporations have to beg for every rupee, how can we expect them to innovate or even deliver basic services effectively?

And this brings me to the third point, which I think is an underrated aspect in an otherwise excellent column: building effective state capacity at the local level. Devesh Kapur's work, "Why Does the Indian State Both Fail and Succeed?", highlights this long-standing issue. We talk a lot about economic growth, infrastructure, and policy reforms, but we rarely focus on the capacity of the people and institutions responsible for executing these reforms. In the context of urban governance, this means having skilled personnel, clear lines of accountability, and a culture of public service. There are perhaps some “green shoots”—some isolated examples of improving capacity—but we need this to become the norm across all our cities, not the exception.

More power, better financial resources (raising and spending), and enhanced state capacity at the local level are the three legs of the stool that will support thriving cities in India. Unfortunately, they are not priorities right now. Part of this is due to flawed design—we've centralized when we should've decentralized. Part of it is apathy— we just don't take local level politics seriously. And part of it is cultural—we underrate decentralization as a polity, seeing it as a threat rather than an opportunity. But ignoring these issues is dangerous. Our cities matter. They are economic engines, cultural hubs, and the future of our nation. We need to fix urban governance, and we need to do it now.

This matters—deeply.