Press Release
Arjun Brij
The IMPRI Center for Habitat, Urban, and Regional Studies (CHURS), IMPRI Impact and Policy Research Institute, New Delhi, hosted an insightful panel discussion on Cities, Local Governance, and Union Budget 2025-26 on February 5, 2025 (Wednesday) at 6:30 p.m. IST under IMPRI’s 6th Annual Series of Thematic Deliberations and Analysis of Interim Union Budget 2025-26, as part of IMPRI.
The session, chaired by Dr. Rumi Aijaz, Senior Fellow and Head of the Urban Policy Research Initiative at the Observer Research Foundation (ORF), New Delhi, who brought together distinguished experts to analyze the budget’s implications for urban development, local governance, and sustainable city planning. Dr. Rumi Aijaz emphasized the need for accountability and capacity building at the local level to ensure effective utilization of funds. He highlighted the importance of integrating climate change mitigation and social inclusion into urban policies.
Key Highlights from the Discussion:
Mr. Tejendra Singh Panwar, Former Deputy Mayor, Shimla; Senior Fellow, IMPRI expressed concerns about the 2025-26 Union Budget’s approach to urban development. Despite cities contributing significantly to India’s GDP, the budget allocates minimal resources, with low direct transfers to urban local bodies. Funding for the Pradhan Mantri Awas Yojana (PMAY) was drastically reduced, raising concerns about urban housing. The focus on capital-intensive projects like metro systems overlooks critical urban issues such as employment and sustainable development. Cuts to programs like Swachh Bharat Mission (SBM) and AMRUT hinder urban infrastructure, and the lack of innovative solutions like an Urban Employment Guarantee Act is concerning.
He concluded that the budget’s focus on capital-intensive projects over social and economic equity could lead to increased disparities and social tensions in urban areas. Urban India needed a robust employment strategy, stronger devolution to local bodies, and people-centric policies, but the budget has largely overlooked these priorities.
Prof. Mahalaya Chatterjee, Professor, Centre for Urban Economic Studies, University of Kolkata; Visiting Professor, IMPRI stressed the need for alternative revenue sources for municipalities and the importance of addressing climate change in urban planning. She raised concerns about the limited focus on urban development in the budget. Despite mentioning urban reforms like strengthening livelihoods for vulnerable groups and street vendors, he questioned the prioritization of large cities and metro projects.
The absence of a clear approach to smaller towns and cities was highlighted, as well as the lack of details on how urban planning reforms would be incentivized at the state level. She also expressed apprehension over the urban challenge fund, particularly the impact on heritage cities. She stressed the need for a parallel plan addressing the negative effects of urbanization, especially in tourism and smaller towns, to avoid damaging ecological and social consequences.
Prof. Chetan Vaidya, Visiting Distinguished Professor, IMPRI; Former Director, School of Planning and Architecture (SPA) and National Institute of Urban Affairs (NIUA), New Delhi criticized the Urban Challenge Fund for its exclusionary approach, arguing that it would benefit only a few large cities while neglecting smaller towns. He highlighted India’s urban diversity, noting that a one-size-fits-all approach won’t work. While pleased with the budget’s simplification and exemptions for Gift City, including tax benefits and infrastructure improvements, the speaker expressed concern about the Urban Challenge Fund, which may only benefit a few cities, neglecting smaller towns.
He commended the budget’s provision for street vendor credit cards but criticized the lack of empowerment for local bodies. He pointed out that the 15th Finance Commission has done more for urban local bodies than the national budget. Additionally, he expressed disappointment that recommendations from the Keshav Verma committee were ignored. He urged more inclusive, ground-level urban reforms in future budgets.
Prof. Tathagata Chatterji, Professor of Urban Management and Governance, Xavier University, Bhubaneswar called for a paradigm shift in urban governance, focusing on sustainability and integrating climate action into city development. He expressed general agreement with other panelists’ views on the budget, noting the increasing role of the central government in urban infrastructure development.
He highlighted the trend towards capital-intensive, technology-driven urban solutions, but caution that the Urban Challenge Fund might mainly benefit cities with high credit ratings, leaving others behind. The challenges of credit rating, land acquisition, and creative urban renewal were discussed, as well as the importance of digitalizing land records and improving governance. However, he critiques the lack of attention to climate change, urban flooding, and heating in the budget. He also questioned the effectiveness of new Metro rail systems in cities with low ridership and call for more comprehensive urban planning.
Mr. Samir Unhale, Urban Expert and Visiting Senior Fellow, IMPRI highlighted the need for professionalism in municipal governance and the importance of bankable projects for urban infrastructure. He discussed the Union Budget for 2025-26, particularly the Urban Development and Housing sector.
He pointed out that the Smart City Mission and NULM have no budgetary allocations, signaling their potential end. While the total budget for Urban Affairs is raised by nearly ₹9,000 crores, Mr. Unhale emphasizes the introduction of a ₹10,000 crore Urban Challenge Fund, pushing cities to become more self-reliant and professional in securing funds. However, he noted a reduction in actual expenditures compared to allocations in previous years.
Other budget highlights include ₹20,000 crores for PMAY 1.0, ₹6,000 crores for PMAY 2.0, and substantial allocations for metros, electric buses, and sanitation. He also emphasized the importance of shifting focus from basic municipal functions to making cities economic hubs. Lastly, he advocated for a more professional municipal system and the inclusion of SDG-focused budgeting for urban sectors.
Conclusion:
The panelists reached a unified conclusion that India’s urban policies need urgent and comprehensive structural reforms to address the systemic gaps. They emphasized the importance of shifting focus towards worker-centric policies, which would ensure that workers—especially in rural areas—gain equitable access to decent jobs and sustainable livelihoods. There was a call to move beyond traditional approaches and address the pressing challenges of urbanization, such as unemployment and inequality.
By prioritizing inclusive growth, fostering green jobs, and adopting forward-thinking measures, India can truly transform its urban landscape. If these reforms are delayed or neglected, there is a significant risk that the country’s economic narrative will veer towards deepening distress, perpetuating inequality, and failing to harness the potential of its urban growth for broader societal benefit. Immediate action and a holistic approach are needed to ensure a sustainable and prosperous future.
IMPRI’s 6th Annual Series of Thematic Deliberations and Analysis of Union Budget 2025-26
IMPRI’s 6th Annual Series of Thematic Deliberations and Analysis of Union Budget 2025-26
Cities, Local Governance and Union Budget 2025-26
Acknowledgement- This article was written by Arjun Brij, a research intern at the IMPRI.
