The Missing Layer in India's Growth Story: Integrated Urban Districts
Shagun Kalra, Development Manager, RMR Group
India counts its cities the way it counted them in 1971, and most of our urban policy still flows from that count. The Census tells us urbanisation rose from 27.8 percent in 2001 to 31.2 percent in 2011. What that headline does not capture is where the growth happened.
Roughly 2,500 new "census towns" appeared in that decade. They look like cities, function like cities, and feed labour into city economies. On paper, they remain villages.
That gap between economic and administrative urbanisation is the actual story.
Indian cities now produce close to 60 percent of the national GDP on a sliver of land area. The administrative idea of a "city" we use to govern, tax, and plan that output is mostly inherited from a pre-liberalisation era.
Mumbai's effective economic geography stretches from Virar to Karjat to Panvel and into eight different municipal corporations and panchayats. Bengaluru's tech corridor crosses three district boundaries before it crosses the Outer Ring Road. We treat these as separate jurisdictions because the law does. Capital and labour do not.
The cost of this mismatch shows up most clearly in municipal finance. Despite the GDP share, own-source municipal revenue in India remains below 0.6 percent of GDP. That is roughly a fifth of what comparable middle-income countries collect locally.
The reason is structural.
Property taxes, user charges, and betterment levies all assume a clean administrative unit with control over the land that benefits from the public good being financed. When a metro line runs through one municipality and property values rise in three more, no single body has the legal handle to capture the uplift. The value leaks. The pipe has no walls.
Urban economics has a useful idea here that has been slow to enter Indian policy conversation: superlinear scaling. In large, well-integrated Indian cities, productivity rises faster than population. Double the effective size of the labour market, more than double the output per worker.
The condition is well integrated, meaning workers can reach jobs across the metro, firms can find suppliers within a usable commute, and the planning authority can extend a sewer line without negotiating with five competing ones. Indian cities deliver some of this scaling in spite of their fragmentation, not because of it. We are leaving growth on the table.
The Smart Cities Mission, with its ₹48,000 crore central allocation across 100 cities, was never designed to fix this. It was a project funnel, not a layer of government. Mobility, housing, and digital infrastructure were sensible priorities, and the mission did push real upgrades through. But a project list cannot substitute for the jurisdiction that is supposed to plan and pay for those projects in the first place. You can give a city a smart traffic system. You cannot give it the authority to plan roads with the next district over by writing a cheque.
What India is missing is a governance layer between the state and the municipality that matches the functional shape of the urban economy. Call it an integrated urban district, a metropolitan authority, a regional planning board. The label matters less than the powers. The body needs planning jurisdiction across the actual labourshed of the city rather than just the municipal limits; the legal ability to issue debt and capture land-value increments across that wider footprint; and accountability to the elected councils inside it, not only to the state government that creates it.
We have tried partial versions of this. Mumbai has an MMRDA. Bengaluru has a BMRDA. The NCR has its regional planning board. They do useful work. None has the fiscal teeth or political weight to override the underlying fragmentation. They mostly plan and recommend. The municipalities below them tax and build, when they can.
This is a fixable problem, and the timing is unusually good. The 16th Finance Commission is preparing its recommendations on the share of taxes that should flow to local bodies. GST has rebuilt the national fiscal architecture and could, with intent, do the same at the metro scale. State governments are starting to notice that real estate revenue, stamp duty, and local economic growth all depend on whether the metro region works as a system rather than as a collection of feuding municipalities.
The next decade of Indian growth will be made or lost in roughly forty metropolitan regions. We can keep counting them as a hundred-odd separate ULBs and wondering why our cities feel chaotic and underfunded. Or we can build the layer that everyone using the city already knows is there.
Published on:
04 June 2026
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