India’s cities will need an estimated US$2.4 trillion in investment by 2050 to become climate-resilient and low-carbon, but municipal corporations continue to raise only a fraction of the funding required, according to a report released by FICCI and EY.
The report, titled “Cities as Growth Engines: Powering India’s Next Leap”, highlights a growing financing challenge for urban India. While cities generate more than 60% of India’s national GDP with roughly one-third of the country’s population, municipal corporations collectively generate revenues equivalent to only around 0.6% of GDP.
Only 20 municipal corporations in India have accessed the capital markets so far, collectively raising approximately US$476 million. The report argues that the ability of cities to finance and attract investment has now become a critical constraint on India’s urban development ambitions.
India’s urban infrastructure requirement is estimated at around US$840 billion over the next 15 years, translating into nearly US$55 billion of investment every year. The scale of the challenge is further highlighted by the estimate that almost 70% of the urban infrastructure India will need by 2047 has yet to be built.
The urban population is expected to increase sharply in the coming decades. India’s cities are projected to house nearly 600 million people by 2036 and contribute almost 70% of national GDP. By 2050, the urban population could reach 877 million, with cities accounting for around 75% of the country’s GDP.
Financeability emerges as the key challenge
The FICCI-EY report argues that the next phase of urban development needs to go beyond simply building physical infrastructure. Cities must become economically competitive and investment-ready, with stronger governance, financial systems and institutional capabilities.
Raj Menda, Chairman of the FICCI Committee on Urban Development and Real Estate and Chairman of the Supervisory Board at RMZ, said India’s urban development strategy must shift towards creating economically competitive and investment-ready cities.
He highlighted governance, innovative financing and integrated planning as critical elements in unlocking the potential of Indian cities and supporting the Viksit Bharat 2047 objective.
The report also points to the Union Cabinet’s ₹1,00,000 crore Urban Challenge Fund as an important signal of this shift. The fund requires urban local bodies to mobilise half of the project cost from capital markets and is expected to catalyse nearly ₹4 lakh crore of investment.
According to the report, the fund should not be viewed merely as another government scheme but as an indication that cities will increasingly need to demonstrate their ability to structure and finance projects.
Six shifts proposed for India’s cities
The report proposes six strategic shifts that it believes can help transform Indian cities into growth engines:
- From service delivery to economic leadership
- From concentrated growth to a network of growth cities
- From fiscal dependence to investment-ready cities
- From infrastructure creation to economic competitiveness
- From data assets to strategic economic intelligence
- From climate vulnerability to climate resilience
A key focus is the need to reduce the concentration of India’s economic activity in a handful of major cities.
The country’s top 10 cities currently contribute close to 30% of national GDP. At the same time, 36 mid-to-large cities and around 450 smaller urban centres remain relatively underleveraged despite accommodating a much larger share of India’s urban population.
The report advocates a more polycentric model of urban development, with economic corridors and PM Gati Shakti helping connect cities and regions. It also proposes positioning Tier-II and Tier-III cities as regional growth hubs.
Infrastructure investment has already expanded
The report’s recommendations build on a decade of significant government-led urban investment.
More than 8,000 projects have been undertaken under the Smart Cities Mission, involving investments of over ₹1.64 lakh crore. AMRUT has seen commitments of around ₹2.7 lakh crore across nearly 500 cities, while 1.25 crore houses have been sanctioned under PMAY-Urban.
However, the report argues that the next stage of India’s urban transformation requires cities to develop stronger financial and institutional capabilities alongside physical infrastructure.
Menda said the success of Viksit Bharat 2047 would depend heavily on the success of India’s cities.
The report’s central message is that cities capable of establishing transparent financial systems, strengthening governance and creating investment-ready balance sheets will be better positioned to attract capital and fund the infrastructure needed for India’s next phase of urban growth.
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