Union Budget 2026 and Urban Development

The Union Budget 2026 emphasizes the triad of capital investment, growth momentum, and the vision of 'Viksit Bharat', highlighting cities as engines of development. However, the budgetary allocation for urban development suggests a different narrative, revealing a significant reduction in funding.

Budget Allocation and Impact

• The total central outlay for urban development has decreased from ₹96,777 crore to ₹85,522 crore for the year 2026-27, marking an 11.6% reduction.
• This reduction is critical given the growing pressures in urban areas, including migration, climate stress, and infrastructure demands.
• Urban development is increasingly viewed as a residual category rather than a priority investment area.

Focus on Metro Rail Projects

• Metro rail projects dominate urban allocations, consuming ₹28,740 crore, approximately 33.6% of the central urban budget, despite a reduction of ₹2,499.28 crore from the previous year.
• Metro systems, though significant, primarily serve dense urban corridors and are neither inclusive nor scalable solutions for broader urban mobility challenges.
• There is a lack of proportional investment in bus transport, non-motorised transport, and last-mile connectivity.

Reduction in Urban Welfare and Service Schemes

• Every major centrally sponsored urban program has seen budget cuts.
• The Pradhan Mantri Awas Yojana (Urban) has been reduced by ₹1,169 crore, nearly a 5.9% decrease, amidst an acute housing shortage.
• The Swachh Bharat Mission (Urban) faces a 50% cut, dropping from ₹5,000 crore to ₹2,500 crore, undermining continuous sanitation services.
• The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) has experienced a 20% reduction, crucial during times of severe urban water stress.

Implications of Budgetary Decisions

• Cuts in urban schemes reinforce the 11.6% overall contraction in support for cities without new institutional or fiscal frameworks.
• Urban local bodies remain financially weak, limiting their capacity for long-term infrastructure planning or service delivery.

Challenges and Recommendations

• Urban India faces challenges like migration, unemployment, climate shocks, and infrastructure deficits.
• Reducing urban spending is seen as strategic short-sightedness rather than fiscal prudence.
• For India to achieve its development goals, urban budgets must expand, diversify, and decentralize to prevent under-funded cities and deferred futures.

The current budget reflects a contradiction between the rhetorical celebration of cities and their fiscal constraints, emphasizing select capital-heavy projects over necessary everyday systems.