India's Urbanisation Policy: Census 2027 and Challenges

Why in the News?

India's 2027 Census will retain the 2011 urban definition, despite concerns about undercounting functional urbanisation. Experts suggest a National Urbanisation Policy to address institutional gaps.

Key Highlights

• The 2027 Census will classify urban areas using the 2011 definition, preserving comparability but risking undercounting functional urbanisation.

• India had 377 million urban residents in 2011; the UN projects over 720 million by 2050.

• Urbanisation is uneven: 60% of urban residents live in Class I cities, while 94% of urban settlements are small towns.

• Peri-urban areas grow at 4.15% annually, faster than administrative urban boundaries.

• The 2026 Union Budget allocated ₹5,000 crore to City Economic Regions and ₹10,000 crore for urbanisation premiums.

Know the Basics

• Statutory town: A settlement notified as urban by a State under Article 243Q(2) of the Constitution.

• Census town: A settlement with at least 5,000 people, 400 persons per sq km density, and 75% male workers in non-agricultural activities.

• Peri-urban area: Regions on the outskirts of cities experiencing rapid urbanisation but not formally classified as urban.

• Twelfth Schedule: Lists 18 municipal functions under Article 243W of the Constitution.

Detailed Analysis

Urban Definition May Underestimate Functional Urbanisation

• India's 2027 Census will retain the 2011 definition, which does not account for functional urbanisation in peri-urban areas.

• Satellite data from the Economic Survey 2026 estimated India was 63% urban in functional terms in 2015, far higher than Census figures.

Uneven Urbanisation Across India

• Urbanisation is concentrated: 60% of urban residents live in Class I cities, while small towns make up 94% of urban settlements.

• Greater Mumbai had nearly 12 million residents in 2011, whereas Gangotri Nagar Panchayat had only 110.

Fiscal Incentives for Urban Transition

• The 16th Finance Commission increased urban local body grants to 45% and introduced a ₹10,000-crore urbanisation premium for States.

• Municipal revenue remains low at 1% of GDP, compared with 7.4% in Brazil and 6% in South Africa.

Need for a National Urbanisation Policy

• Current measures lack a coherent framework for recognising transitioning settlements or aligning fiscal incentives.

• WRI India recommends seven transformations, including standardised urban definitions, modernised planning, and tiered coordination via a National Urbanisation Council.

Significance for India

• A National Urbanisation Policy could address gaps in planning, fiscal incentives, and governance for transitioning settlements.

• Improved urban classification impacts access to municipal finance, environmental regulations, and government schemes.

• UPSC could test this in GS-II (Governance) or GS-III (Economic Development), focusing on urbanisation challenges and policy solutions.

• Functional urbanisation data can inform policies on climate adaptation, housing, and infrastructure.

Challenges

• Urban notification is discretionary under Article 243Q(2), with no standard criteria or requirement to publish reasons.

• 52% of statutory towns and 76% of census towns lack master plans, hindering effective spatial planning.

• Municipal revenue is inadequate, and scheme-specific transfers create financial uncertainty for urban local bodies.

Way Forward

• The Centre should establish a National Urbanisation Policy to address institutional gaps and coordinate urban planning.

• States must update planning laws to reflect the rural-urban continuum and integrate peri-urban areas into municipalities.

• Finance Commission grants should be linked to functional urbanisation metrics, ensuring predictable funding for municipalities.

• Use satellite and geospatial data to periodically review settlement status against fixed criteria for urban classification.