What does the Budget offer urban India?

As the Union Budget 2026 was placed before Parliament, the Finance Minister once again invoked the familiar triad of capital investment, growth momentum and the long-held vision of ‘Viksit Bharat’. Cities were spoken of as engines of development, enablers of productivity and sites of future opportunity. Yet when one moves from rhetoric to arithmetic, urban India emerges not as a priority but as a sector quietly absorbing fiscal contraction.

The headline fact is stark: the total central outlay for urban development has fallen from ₹96,777 crore in the previous year to ₹85,522 crore in 2026-27. This is a reduction of ₹11,255 crore, amounting to a shrinkage of about 11.6%. When inflation is factored in, the real cut is even sharper. In effect, urban India is being asked to do more with less, at precisely the moment when cities face mounting pressures of migration, climate stress, infrastructure fatigue and job creation.

This contraction also signals a deeper problem: while the government continues to foreground capital expenditure at the macro level, urban development is no longer seen as a growth-critical investment space, but rather as a residual category to be adjusted once larger fiscal priorities are met.

The centrality of the metro rail

Within this shrinking envelope, the structure of spending remains deeply skewed. Metro rail projects continue to dominate urban allocations, even as overall urban spending contracts. The allocation for metro and mass rapid transit projects has declined from ₹31,239.28 crore to ₹28,740 crore, a reduction of ₹2,499.28 crore. In percentage terms, this is a cut of roughly 8%. While this appears as moderate, the larger picture tells a different story.

Out of the total urban outlay of ₹85,522 crore,metro rail alone accounts for ₹28,740 crore, which translates to approximately 33.6% of all central urban spending. In other words, one-third of India’s urban budget continues to be absorbed by a single transport mode.

This is not a neutral policy choice. Metro systems are capital-intensive, spatially limited and socially selective. They primarily serve dense corridors in large cities and cater disproportionately to formal, middle-class commuters. They are important, but they are neither the most inclusive nor the most scalable solution for India’s urban mobility crisis. What is missing is proportional investment in bus-based public transport, non-motorised transport, suburban rail, and last-mile connectivity — modes that actually carry the urban majority. By continuing to privilege metros even within a shrinking budget, the state reinforces an urban imagination that prioritises visibility over universality.

The persistence in metro-centric planning reveals a deeper policy blind spot. Public transport is being equated with rail projects, while buses, walking and cycling — the modes that actually move most urban Indians — remain peripheral. Metros cannot be the sole answer in a country where a majority of urban trips are short, income-constrained and highly sensitive to fare increases. A fraction of metro spending redirected towards city bus systems or non-motorised infrastructure would yield far higher social returns. Yet the Budget does not reflect such a rebalancing.

Urban mobility, in this fiscal design, is treated as an engineering problem rather than a social one.

The retreat of flagship urban schemes

If the metro rail represents continuity, the treatment of flagship urban welfare and service schemes represents retreat. Every major centrally sponsored urban programme has seen a reduction in allocation.

The allocation for the Pradhan Mantri Awas Yojana (Urban) (PMAY-U) has declined from ₹19,794 crore to ₹18,625 crore, a reduction of ₹1,169 crore — nearly a 5.9% cut. This comes at a time when urban housing shortage remains acute, affordability is worsening, and informal settlements continue to expand at the peripheries of cities. A cut in housing support is not fiscally neutral — it directly translates into prolonged informality, overcrowding and exclusion from basic services.

The sharpest cut has been reserved for sanitation. The allocation for the Swachh Bharat Mission (Urban) (SBM-U) has been halved from ₹5,000 crore to ₹2,500 crore, a 50% reduction. This is not a marginal adjustment; it is a fundamental rollback. Urban sanitation is not a one-time achievement but a continuous service requiring sustained investment — particularly for waste processing, sewage treatment, faecal sludge management and worker safety. Cutting sanitation funding by half signals that urban cleanliness and public health are no longer seen as urgent policy domains.

Additionally, the allocation for the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme has also fallen from ₹10,000 crore to ₹8,000 crore, a 20% cut. This reduction is especially troubling in an era of acute urban water stress. Cities across India are grappling with groundwater depletion, inequitable access, ageing pipelines and climate-induced variability. AMRUT was meant to be the backbone of universal water and sewerage access. A fifth of its budget disappearing weakens the very foundations of urban sustainability.

Shrinking commitments

Taken together, the picture is unambiguous. Centrally sponsored urban schemes have received major cuts, reinforcing the 11.6% nominal contraction in central support for cities.

This contraction is not offset by any new institutional architecture, fiscal devolution or empowered municipal financing frameworks. Urban local bodies remain fiscally weak, dependent on tied transfers, and constrained in their ability to plan long-term infrastructure or service delivery.

What makes this particularly consequential is the timing. Urban India is currently absorbing large-scale migration and demographic churn; rising urban unemployment and informalisation of the workspace; climate shocks such as heat waves, floods, and water scarcity; and infrastructure backlogs in transport, housing and sanitation.

Against this backdrop, reducing real urban spending is not fiscal prudence; it is strategic short-sightedness.

The empty promise of development

The government’s vision of Viksit Bharat rests on growth, productivity and global competitiveness.

But no country has achieved high-income status without strong, well-funded, inclusive cities. Urban India generates the bulk of GDP, absorbs labour, and anchors innovation ecosystems. Weakening its fiscal base undermines the very ambition the Budget claims to advance.

What this Budget ultimately reflects is a contradiction: cities are celebrated rhetorically but constrained fiscally.

The emphasis remains on select capital-heavy projects rather than everyday systems that determine whether cities are liveable, equitable and resilient.

The Union Budget 2026 does not abandon urban India — but it unmistakably pulls back. With an 11.6% cut in total urban allocations, steep reductions in sanitation, water and housing, and one-third of remaining funds locked in metro projects, the Budget signals caution where urgency is required.

Urban India is expected to carry the weight of future growth, climate adaptation and social transformation. Yet the fiscal imagination on display treats cities as cost centres rather than engines of national renewal.

If India is serious about its development trajectory, urban budgets must expand, diversify and decentralise — not shrink, narrow and centralise.

Anything less risks turning the promise of Viksit Bharat into a slogan built on under-funded cities and deferred futures.

Tikender Singh Panwar is a former Deputy Mayor of Shimla and currently a member of the Kerala Urban Commission.