📰India’s Cities Need More Power

India’s cities generate 60 percent of GDP and employ hundreds of millions, yet they’re managed like afterthoughts. Today, we investigate how to fix governance in India’s metropolises.

If you have any questions about India, fill out this form or reach out to Shreyas at [email protected]

A Private Circle for High-Net-Worth Peers

Long Angle is a private, vetted community for HNW entrepreneurs and executives. No membership fees. What’s inside:

• Self-made professionals, 30-55 years old, $5M-$100M net worth

• Confidential discussions, peer advisory groups, live meetups

• Institutional-grade investments, $100M+ invested annually

Apply to Join

Reach out to [email protected] to reach our audience and see your advertisement here.

India’s Cities Need More Power

India’s growth story has long been told through its highways and factories, but the truth is more local, and more fragile. For all the talk of a $5 trillion (₹439.8 trillion) economy, half of India still lives in cities that barely function. Every monsoon, Mumbai drowns. Every summer, Delhi chokes. Every week, Bangalore runs out of water. It’s a crisis hiding in plain sight: India’s cities are both the country’s growth engines and its weakest link.

An Economist piece this week put the problem in brutal clarity: Bhubaneswar, the capital of Odisha, is an exception precisely because it works. It has pavements, bus lanes, greenery, and will soon have 24-hour drinkable tap water, something even Delhi’s elite neighborhoods can’t claim. That contrast—one city as a model, fifty others as warnings—captures the paradox of India’s urban future.

India’s cities generate 60 percent of GDP and employ hundreds of millions, yet they’re managed like afterthoughts. The average Indian mayor has less power than the principal of a government school. The country that wants to be the world’s factory and tech hub still governs its cities as if they’re colonial outposts. The question isn’t whether urban decay is slowing India’s rise—it’s how much longer India can grow in spite of it.

A structural design flaw: The neglect of cities isn’t an accident. It’s built into India’s political DNA. Gandhi’s romanticism about villages—“the soul of India lives in its villages”—became a constitutional principle. The 73rd and 74th Amendments of 1992 tried to formalize “local government,” but real power still rests with states. Municipalities are glorified service providers; budgets, taxes, and planning all depend on state capitals. The result is paralysis disguised as governance.

Compare this with China, where mayors are mini-governors rewarded for economic performance. India’s local officials, by contrast, are career bureaucrats parachuted in by state governments. The urban voter is barely a political constituency; the city doesn’t elect its CEO. When Mumbai hasn’t had local elections for two years, no one notices, because it doesn’t change anything.

This structural flaw explains why even massive spending, $204 billion (₹18 trillion) since 2014 under the Modi government, hasn’t transformed most cities. Flyovers rise, metros extend, smart city dashboards flicker to life. But none of it adds up to systemic reform because no one owns the outcome. There’s no accountability loop between citizens and city managers. When everything goes wrong, responsibility evaporates upward.

The Bhubaneswar model: That’s why Bhubaneswar matters; it proves local governance can work. Odisha’s approach, under G. Mathi Vathanan, starts with a radical premise: trust people who live in slums to know what they need. Instead of bulldozing informal settlements, Odisha gave 250,000 slum dwellers land titles. Once people had legal ownership, they invested in their homes; the state followed with metered water, sanitation, lighting, and waste collection.

This model turns the logic of Indian urban policy on its head. Most states treat slums as problems to erase; Odisha treats them as communities to integrate. Its “fourth-tier” governance system, slum associations that directly engage in planning, gives residents a say over what gets built, maintained, or ignored. It’s messy, slow, and deeply democratic. And it works.

The proof is in the imitation. Officials from ten states have studied Odisha’s land-titling model; Punjab has adopted it for 1.4 million residents. It’s not glamorous policy, it’s ownership, trust, and basic services, but it’s the kind of reform that builds cities from below instead of above.

The centralization trap: Yet Odisha’s success only underscores the broader problem: dependence on benevolent states. Where state leadership is weak or distracted, cities rot. Most metros, from Lucknow to Chennai, are trapped between central schemes and state bottlenecks. Delhi’s endless turf wars between the city government and the lieutenant governor are an open reminder that urban autonomy is a political nonstarter.

The Modi government has invested heavily in infrastructure, metros, affordable housing, and water supply, but its programs are still top-down. The Smart Cities Mission, launched in 2015, improved data collection and visibility but rarely devolved fiscal control. As the Economist notes, money from Delhi can only be used inside official municipal boundaries, even though most cities have sprawled far beyond them. Half of India’s urban settlements are still technically “rural,” meaning they can’t access urban funds at all.

The outcome is fragmentation. Water, electricity, and transport fall under different agencies. A mayor can’t coordinate across them, and no one can be voted out for failure. Bhubaneswar’s tap water project was implemented not by its city council but by a state-run corporation. That’s why India’s urban infrastructure feels like a patchwork: plenty of projects, no integration.

The economics of dysfunction: The irony is that fixing cities isn’t just a civic issue; it’s macroeconomics. India’s growth narrative relies on productivity gains that only cities can deliver. Urban workers earn 122 percent more than rural ones; every 10 percent increase in urbanization historically boosts GDP per capita by 1–1.5 percent. But congestion, pollution, and inadequate housing erode that premium. McKinsey once estimated that poor urban infrastructure costs India 1.5–2 percent of GDP annually.

Investors see it too. The world’s most bullish EM investors still ask: where will the next Singapore or Shenzhen come from? If Mumbai can’t provide clean water or Bangalore reliable electricity, capital moves elsewhere. Urban collapse is not just an inconvenience; it’s a brake on India’s global ambitions.

There’s also a fiscal logic to decentralization. Empowering cities to collect and spend locally increases accountability and tax efficiency. China’s growth was turbocharged when mayors were incentivized to grow local economies. India, by contrast, sends GST collections upward and then doles out grants downward, creating dependence and delay. The only way to fix Indian cities long-term is to make them financially autonomous, not perpetually petitionary.

Trust the City: The op-ed ends with a quote from Odisha’s Mathi Vathanan: “Trust the people. They are better than you.” It’s an unexpectedly radical idea for India’s administrative culture. Trust means risk. It means letting cities fail and recover on their own terms. It means acknowledging that Delhi and Mumbai may need different rules than Patna or Indore.

That trust deficit, between government and governed, is what separates functional cities from dysfunctional ones. In most of India, citizens can’t even pay property taxes online. Public hearings are rare, data is fragmented, and civic participation stops at complaint apps. The technology exists; what’s missing is political will.

If India wants to graduate from middle-income status, it must re-engineer this relationship. That starts with the third tier, giving cities real executives, empowered mayors, and multi-year budgets. The fourth-tier experiment in Odisha is promising, but it’s a workaround, not a replacement. Until local governments can hire, tax, and plan independently, “smart cities” will remain shiny facades over broken plumbing.

What this means for India’s future: The stakes are immense. By 2036, 73 percent of India’s population growth will occur in urban areas. That’s roughly 300 million new urban residents in a single generation, the equivalent of adding a new United States inside India’s borders. Whether those people live in opportunity or squalor will decide India’s growth trajectory more than any trade deal or budget announcement.

Cities are where social mobility happens. They’re also where social unrest begins. The next decade of Indian politics will hinge not on rural subsidies but on urban livability. A party that fixes housing, water, and transport in Tier-2 and Tier-3 cities will command the loyalty of the emerging urban middle class, the voters who will define India’s next political cycle.

The Modi government’s investment is a start, but without structural reform, strong mayors, fiscal autonomy, and local accountability, it’s just more concrete poured over the same foundation. India doesn’t need smarter cities; it needs freer ones.

See you Monday.

Written by Eshaan Chanda & Yash Tibrewal. Edited by Shreyas Sinha.

Sponsor the next newsletter to reach tens of thousands of U.S.-based business-savvy professionals. Reach out to [email protected].

Could your business use expert insights to power growth in India? Reach out to [email protected] for a free introductory call.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.