India’s Urban Crisis Deepens as States Choke City-Level Governance

India’s Urban Crisis Deepens as States Choke City-Level Governance

The deepening urban crisis in India is less a failure of urban local bodies (ULBs) and more a systemic consequence of state interference. While the 74th Constitutional Amendment Act envisioned empowered cities as fulcrums of governance and development, the reality is far bleaker—ULBs are starved of autonomy, resources, and accountability. If unaddressed, this erosion of city-level governance will fundamentally undermine urban India's future.

The Institutional Landscape: Power Without Autonomy

The 74th Constitutional Amendment Act of 1992 marked a watershed moment in urban governance, granting ULBs constitutional status and assigning 18 functional responsibilities under the 12th Schedule. Yet, three decades later, these bodies operate under scant autonomy. According to the CAG’s 2024 audit, ULBs exercise control over barely 22% of their assigned domain, managing only 4 of the 18 functions. The rest remain under state governments or parastatal agencies, rendering “self-governance” a constitutional chimera.

The institutional mechanisms for accountability and planning—State Election Commissions (SECs), District Planning Committees (DPCs), and Metropolitan Planning Committees (MPCs)—have fared no better. The same CAG report found:

• 61% of ULBs across 17 states lacked elected councils.
• Only five states conducted direct mayoral elections.
• District Planning Committees existed in just 10 states, of which none met annually as required.
• Of nine states mandated to form MPCs, only three have operational committees.

The Argument: Fiscal Dependence, Administrative Paralysis

Fiscal misgovernance lies at the crux of urban dysfunction. While Urban Local Bodies (ULBs) are empowered by the Constitution to collect property taxes, state governments often decide tax rates, leaving ULBs dependent on outdated valuations. The result is a 42% expenditure–revenue gap, as revealed by CAG data across 11 states. ULBs allocated only 29% of their funds to developmental activities, compared to over 50% in Southeast Asian counterparts.

Further, State Finance Commissions (SFCs)—critical for predictable fiscal transfers—have become dysfunctional relics. In 15 states, ULBs faced an average shortfall of ₹1,606 crore in allocated funds due to partial SFC recommendations, severely affecting capital investments for infrastructure. Predictable fiscal transfers are not just desirable; they are foundational for service delivery and sustainable urban planning.

On the administrative side, ULBs are handicapped by staffing shortages and state control over personnel recruitment. The Shimla Municipal Corporation, for instance, required 720 personnel but was sanctioned only 20 posts in the 2024 budget cycle. Across 18 states, one-third of sanctioned ULB positions remain vacant—a poignant reminder that governance agencies cannot function without human capital.

Institutional Critique: State Governments as the Bottleneck

The root cause of this dysfunction is political: state governments leverage urban governance as a mechanism for centralized power rather than local autonomy. Even flagship programs like AMRUT and Smart Cities Mission, while laudable in intent, remain mired in top-down control. What drives this centralization? The fear of losing political leverage over resource allocation, real estate development, and urban patronage networks.

Furthermore, state legislative assemblies routinely undercut ULBs by enacting laws that supersede urban councils. Lack of clarity in constitutional interpretation further exacerbates tensions—notably, India’s Supreme Court has yet to adjudicate decisively on whether state-imposed limits on ULB autonomy violate Article 243Q.

The Counter-Narrative: Balancing Urban and Rural Needs

Critics argue that states’ dominance over ULBs is an unfortunate necessity given India's rural–urban divide. Unlike Germany’s subsidiarity model, where municipal autonomy thrives in urban areas, Indian cities coexist with vast rural hinterlands in need of equal attention. Rural constituencies represent 70% of India’s electorate, driving political decision-making focused on rural priorities even in urban governance frameworks. Under such conditions, empowering ULBs might unfairly disadvantage rural development programs.

There is also merit in the argument that decentralization alone will not solve India's urban crisis. Without adequate technical capacity or planning expertise, devolving functions to ULBs risks exacerbating existing inefficiencies. For example, in the Swachh Bharat Mission (Urban), local bodies frequently fail to implement waste management protocols due to poor capacity-building measures.

International Perspective: Lessons from Brazil

Brazil, facing similar urban challenges, adopted a distinctly progressive urban governance model under its City Statute of 2001. The law grants municipal governments power over zoning, taxation, and environmental policies—distinctly reducing state interference through explicit legal safeguards. Crucially, Brazil’s participatory budgeting process incorporates local citizens in expenditure decisions. In contrast, India's ULBs struggle to even constitute functional city councils. What Brazil calls participatory governance, India reduces to bureaucratic tussles between state and urban authorities.

Assessment: Steps Towards True Urban Autonomy

Where does this leave urban governance in India? The present crisis cannot be solved simply through better schemes or funding—it requires structural reform. State governments must:

• Operationalize SECs to guarantee regular municipal elections.
• Mandate the constitution of DPCs and MPCs as stipulated under the law.
• Allow ULBs autonomy over tax rates, staffing, and land-use regulations.

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