Urban Governance in India: Institutional Fragmentation, Service Delivery Gaps, and Pathways for Strengthening Municipal Capacity

Introduction

India is undergoing a rapid and complex urban transition. Cities drive economic growth, employment, social mobility, and infrastructure development, yet governance outcomes across many Indian cities remain uneven. Service delivery systems struggle to keep pace with urban expansion, migration, informal settlements, and environmental pressures. The challenge is not only about infrastructure or funding shortages. It is fundamentally about the design and capacity of urban governance institutions, their distribution of powers, and the coherence of their accountability systems (NITI Aayog 2021).

This paper argues that India’s urban challenges are deeply rooted in institutional fragmentation, fiscal dependence, overlapping mandates, and weak municipal capacity. Despite the constitutional recognition of Urban Local Bodies, state governments continue to exercise decisive control over planning, staffing, finance, and service functions, producing a persistent gap between constitutional intent and operational governance reality (UN-Habitat 2020; NITI Aayog 2023).

The analysis traces the evolution of urban governance, examines institutional fragmentation, explores fiscal and administrative constraints, and assesses the impact of these weaknesses on service delivery. It concludes with policy pathways for strengthening municipal capacity and enabling more accountable, coordinated, and capable urban governance systems.

Evolution of Urban Governance in India

The Seventy-Fourth Constitutional Amendment Act of 1992 marked a major turning point in India’s governance architecture. It granted constitutional status to Urban Local Bodies (ULBs) and introduced the Twelfth Schedule, which listed urban planning, sanitation, housing, roads, public health, slum improvement, and environmental management among eighteen municipal functions (Government of India 2015; NITI Aayog 2021).

The Amendment mandated regular elections, State Election Commissions, and State Finance Commissions. Its normative vision was clear: decentralised, accountable, democratic urban governance grounded in empowered local institutions (World Bank 2020).

However, the implementation of decentralisation has been incomplete and uneven across states. Many key functions remain with parastatal agencies or state departments rather than municipal governments. In several cities, planning, land regulation, water supply, or transport continue to be governed by parallel authorities, limiting the functional space of elected municipal institutions (OECD 2019; UN-Habitat 2020).

This creates a structural contradiction. Cities are constitutionally decentralised in theory, but administratively centralised in practice.

Institutional Architecture and Fragmentation

Urban governance in India is characterised by parallel and overlapping institutional structures, including:

• municipal corporations and councils

• state development authorities

• housing boards and utilities

• parastatal transport and water agencies

• special purpose vehicles under national missions

This architecture leads to fragmentation of authority and blurred accountability (NITI Aayog 2021; McKinsey Global Institute 2018).

Decision-making is distributed across multiple agencies with limited coordination mechanisms. Citizens face difficulty identifying which institution is responsible for which function, while municipal governments are frequently held accountable for failures in domains they do not fully control. Where development authorities control land-use planning, and municipalities manage only routine services, the result is weak urban political oversight and disjointed urban development trajectories (OECD 2019).

Mission-driven implementation models and project-based governance structures have accelerated infrastructure delivery in some contexts, but they have also reinforced administrative parallelism. While these approaches can deliver short-term outputs, they do little to strengthen long-term municipal capacity or institutional learning (World Bank 2020; NITI Aayog 2023).

Municipal Finance and Fiscal Stress

Fiscal capacity remains one of the most critical constraints on urban governance. Despite cities contributing a large share of economic output, municipal bodies control only a small fraction of public revenue, relying heavily on inter-governmental transfers and centrally sponsored programs (McKinsey Global Institute 2018; NITI Aayog 2021).

Own-source revenues such as property tax and user charges are often weak due to:

• under-assessment and outdated valuation systems

• administrative inefficiencies

• political reluctance to revise tariffs

• limited financial management capacity

This creates a structural imbalance between expectations placed on municipalities and the resources they command (World Bank 2020). Dependence on higher-tier funding reduces planning autonomy, discourages innovation, and reinforces compliance-driven rather than developmental governance behaviour (UN-Habitat 2020).

Fiscal empowerment is therefore not only a financial reform agenda. It is a governance reform imperative (NITI Aayog 2023).

Administrative and Human Resource Capacity

Municipal administrative systems face persistent staffing shortages, skill deficits, and capacity asymmetries. Technical expertise in domains such as urban planning, engineering, financial management, public health, and data governance is often limited or fragmented across contractual and outsourced arrangements (World Bank 2020; UN-Habitat 2020).

The absence of dedicated municipal cadres and structured training ecosystems restricts internal institutional learning. This weakens the ability of city governments to plan strategically, coordinate across agencies, or implement complex infrastructure and service delivery programs (NITI Aayog 2023).

Capacity building must therefore focus not only on increasing personnel but on creating professional municipal service systems, technical leadership pathways, and data-driven institutional processes (OECD 2019).

Service Delivery and Fragmented Outcomes

Institutional fragmentation and capacity gaps directly affect outcomes in core service domains such as housing, sanitation, water supply, solid waste management, mobility, and public health.

Where multiple agencies operate independently, coordination failures and service gaps emerge (World Bank 2020). Informal settlements often expand faster than infrastructure systems, producing inequities in access to sanitation, water, and public services. Reactive governance replaces preventive planning.

Urban governance outcomes thus reflect systemic weaknesses in institutional integration, spatial planning linkages, and multi-agency coordination rather than isolated technical failures (NITI Aayog 2021; UN-Habitat 2020).

Accountability, Data, and Citizen Interface

Accountability mechanisms in municipal institutions remain uneven. Grievance systems, ward committees, participatory planning structures, and public performance reporting frameworks exist in principle but are inconsistently implemented in practice (UN-Habitat 2020).

Weak data systems further constrain accountability. In many cities, reliable service metrics, geospatial coverage records, or financial transparency platforms remain limited, making it difficult to evaluate performance or prioritise investment decisions (World Bank 2020).

Digital platforms have created opportunities for transparency, yet without institutional integration and analytical capacity, data does not automatically translate into better governance (NITI Aayog 2023).

Policy Implications

The evidence suggests that urban challenges in India cannot be solved through project-driven or infrastructure-centric approaches alone. Large capital expenditure programs may generate visible outcomes, but they do not address the systemic governance constraints that shape long-term performance (World Bank 2020; McKinsey Global Institute 2018).

Urban reform must shift toward a governance-centred model of transformation that prioritises institutional clarity, financial sustainability, administrative capability, and accountable coordination structures (NITI Aayog 2021; OECD 2019).

Pathways for Strengthening Municipal Capacity

1. Clarifying Institutional Mandates and Coordination

Clear allocation of functions across municipal governments, development authorities, and state agencies is essential. Coordination frameworks should define decision processes and accountability relationships to reduce duplication and policy fragmentation (NITI Aayog 2021).

2. Enhancing Fiscal Autonomy and Financial Stability

Strengthening property taxation, rationalising user charges, improving financial management systems, and ensuring predictable inter-governmental transfers can expand fiscal space and enable long-term planning (World Bank 2020; NITI Aayog 2023).

3. Building Professional Municipal Cadres

States should institutionalise professional municipal service systems with structured training, technical specialisation pathways, and leadership capacity to support complex governance functions (OECD 2019; UN-Habitat 2020).

4. Integrating Planning and Service Delivery

Spatial planning, infrastructure development, and service delivery must operate within integrated governance frameworks to prevent fragmented outcomes and reinforce coordinated urban growth (NITI Aayog 2023).

5. Strengthening Accountability and Public Engagement

Transparent performance reporting, participatory planning mechanisms, and responsive grievance systems can enhance trust, inclusion, and institutional legitimacy (UN-Habitat 2020).

6. Sequencing Governance Reform

Short-term reforms should focus on financial systems and administrative restructuring, while long-term reforms should address institutional consolidation, cadre development, and metropolitan-scale governance capacity (World Bank 2020).

Conclusion

India’s urban transformation will be shaped not only by infrastructure investment but by the strength and design of its governance institutions. Cities that develop empowered, coordinated, fiscally stable, and professionally capable municipal systems will be better positioned to deliver inclusive, resilient, and sustainable development outcomes.

Strengthening urban governance is therefore not a narrow administrative exercise. It is a foundational investment in the institutional architecture that will determine how India’s cities evolve as democratic, developmental, and citizen-oriented spaces (NITI Aayog 2021; World Bank 2020).

-------------------

References

Brookings Institution. 2022. Urbanization and Economic Growth in Emerging Markets. Washington, DC: Brookings Institution.

Government of India. 2015. National Smart Cities Mission Guidelines. Ministry of Urban Development.

Government of India. 2021. National Urban Digital Mission (NUDM): Strategy and Implementation Framework.Ministry of Housing and Urban Affairs.

McKinsey Global Institute. 2018. India’s Urban Awakening: Building Inclusive Cities for a Sustainable Future. New York: McKinsey & Company.

Ministry of Housing and Urban Affairs. 2023. India Urban Infrastructure Report. Government of India.

NITI Aayog. 2021. Reimagining Urban Governance in India. New Delhi: NITI Aayog.

NITI Aayog. 2023. Urban Planning Capacity in India: Reforms and Pathways. New Delhi: NITI Aayog.

OECD. 2019. The Governance of Land Use in India: Policy Analysis and Recommendations. Paris: OECD Publishing.

UN-Habitat. 2020. World Cities Report 2020: The Value of Sustainable Urbanization. Nairobi: United Nations Human Settlements Programme.

World Bank. 2020. Leveraging Urbanisation in South Asia: Managing Spatial Transformation for Prosperity and Livability. Washington, DC: World Bank.