Introduction Global evidence, both historical and recent, shows a close association between urbanization and increases in per capita incomes. As countries develop, economic activity shifts from agriculture to manufacturing and services. This shift leads to the growth of urban centers, driven by cities' ability to efficiently produce goods and services, create jobs, and foster innovation. Given the importance of the urbanization–economic growth relationship, India's urbanization process holds much promise for its economic aspirations. In 2011, only 31.1% of India's population was urban (377 million people). Projections indicate this share will increase to 50% by mid-century, adding about 400 million people to India's cities. For India to achieve its goal of becoming a high-income economy by 2047, it is crucial for its cities to reach their potential as engines of economic growth. A study published by the Asian Development Bank (ADB) suggests a framework for states and cities to foster economic growth and job creation. Evaluating twelve cities across seven states using the concept of natural cities based on nighttime lights—to capture the urbanization process beyond formal city limits—the study identifies bottlenecks and presents solutions, including mechanisms for coordinating spatial and economic planning. This article is adapted from that study. Key Bottlenecks Constraining the Economic Potential of Cities in India Lack of common economic vision. Cities have expanded significantly, often beyond municipal boundaries, but a part of this growth has been unplanned. This is due to the absence of an integrated development plan and a long-term economic vision that outlines key goals for cities and ensures the provision of the public inputs that enterprises need if they are to thrive. Without such a vision, urban areas grow without adequate space for infrastructure, businesses, factories, and modern social amenities. The result is congestion, uneven access to utilities, susceptibility to weather events, and high land prices. These issues hinder economic dynamism. Challenges related to land. As India urbanizes, making the land market work more efficiently and flexibly is urgent. Metropolitan land is costly, making projects challenging, while smaller urban centers face bottlenecks in land acquisition. Serviced urban land is scarce, leading to competing claims and unplanned sprawl. Key issues include inadequate land records and complex processes for acquisition, conversion, and aggregation. Fragmented records and multiple authorities complicate the process. For example, land conversion from agricultural to urban use faces delays due to poor records and legal disputes, and aggregating land is time-consuming due to unclear titles. Lack of integrated approach to master planning. City master plans often fail to align with economic goals, focusing on population, land, mobility, and housing issues instead. While some plans mention economic development, there is a lack of integration with investment strategies. This leads to master plans controlling rather than encouraging growth. While states have linked industrial development with master plans, land-use classifications can leave ambiguities regarding how new activities such as IT, data centers, logistics, and R&D should be handled, leading to isolated solutions like business and industrial parks that aren’t sufficiently integrated with their broader urban surroundings. In this way, master plans can fail to adapt to economic change, resulting in mismatched land-use allocations and inadequate management of cities' economic footprints. Inadequate institutional frameworks and capacity constraints. Natural cities often span multiple administrative units (urban and rural), requiring cross-jurisdiction governance, which is often absent. Multiple stakeholders with overlapping functions can lead to fragmented governance and unclear accountability. Further, there is insufficient coordination between agencies involved in industrial, economic, and urban planning implies that c. City governments have limited influence in coordinating local agencies and guiding economic development. The 74th Constitutional Amendment mandates decentralization, but devolution to urban local bodies (ULBs) has been incomplete. ULBs mainly provide basic services and rely on state and central funding, lacking the authority to attract investments or support local economic growth. Additionally, ULBs struggle with insufficiently trained personnel, hindering effective urban management and stakeholder engagement. Business-related policies and regulatory constraints. In India, central and state governments set business policies and regulations, while ULBs have limited roles in attracting investments and promoting their cities. However, in principle, ULBs can influence the business environment by setting development norms to which businesses must adhere, thereby influencing the ease of starting and operating businesses, especially in service industries commonly found in cities. Recommendations To develop an economic vision Institute a city economic council with a governance structure tailored to state and city characteristics. Support the council with representatives from the private sector and experts in economic and urban development. Align the economic vision for the city with a regional spatial strategy. Create city partnerships for thematic development opportunities and implementation. Develop a graded and certified program to enhance the capacity of key stakeholders involved in planning and implementing the economic vision. To supply land needed for development Modernize and digitize land records systems and make them interoperable across departments. Integrate revenue, registration, and survey institutions at the state level to harmonize land records data. Establish integrated digital technology platforms to improve the efficiency of land transactions. Explore participatory land assembly mechanisms. To achieve integrated master planning aligned with economic goals Adopt a regional approach to planning by (i) demarcating the larger urban region and (ii) planning the city and commuting area together. Ensure the master plan includes actionable short-term milestones guided by a long-term strategic vision. Develop a capital investment plan to identify projects aligned with the city’s economic vision, economically sound, and self-sustaining. Explore cluster-based planning mechanisms based on local labor competencies, material resources, and connectivity considerations. Facilitate changes in land-use definitions and regulations at predefined intervals, considering contemporary industry needs. Coordinate among agencies to align technical documents and implementation guidelines with the economic vision. Formulate an interdepartmental team to monitor the progress and outcomes of projects. Prepare project action plans specifying milestones, relevant agencies, and collaboration mechanisms. To strengthen institutional frameworks and build capacity Enable ULBs and urban departments to participate in economic planning and visioning processes. Engage public and private stakeholders in integrated approaches that combine urban planning and economic visioning across levels and sectors. Build multiple timeframes into economic strategies (5-, 10-, and 20-year periods) and incorporate incentives for public agencies to address local needs. Review and rationalize roles and responsibilities of local and state-level agencies to minimize overlaps and improve accountability. Streamline functions across levels to reduce overlapping roles and improve communication and coordination. Invest in expanding ULB staff to meet the demands of urban expansion. Expand support and training programs to build capacity and regularly upgrade knowledge and skills. To create a policy and regulatory environment conducive to business activity Develop city-specific marketing programs aligned with the city’s vision to support investments. Explore establishing an investment promotion agency for cities. Create city-level single window facilities for service industries (hospitality, healthcare, commercial developments, and education). Enable automated/digital approval mechanisms recognized by all state and ULB departments, with mandated time-bound service provision for businesses. Empower local bodies in industrial areas not under ULBs to better coordinate industry and urban development functions. Resource Asian Development Bank (ADB). 2024. Harnessing the Economic Potential of India’s Cities. Ask the Experts Mohammad Athar Partner and Leader, Capital Projects and Infrastructure, PricewaterhouseCoopers International, India Mohammad has more than 17 years of experience in formulating strategies and development plans for industrial corridors, parks, special economic zones, and urban projects. Recently, he collaborated with the ADB to develop a framework for "Cities as Engines for Economic Growth." He is actively involved in economic planning and investment promotion across South Asia, the Middle East, and Central Asia. Rana Hasan Regional Lead Economist, Office of the Chief Economist and Director General, Economic Research and Development Impact Department, ADB Rana Hasan’s research areas and interests include industrial development, labor economics, urban economics, and poverty and inequality. He was previously director in ADB’s research department and an East-West Center Fellow. He has published in various journals (Journal of Comparative Economics, Journal of Development Economics, Review of Economics and Statistics, and World Development), and co-edited books on trade and labor related issues. He holds a PhD in Economics from the University of Maryland and a Masters’ degree in Economics from the University of Delhi. He is assigned to the South Asia Department. Lei Lei Song Director, Economic Analysis and Operational Support Division, Economic Research and Development Impact Department, ADB Lei Lei Song leads a team of economists supporting ADB operations, conducting research on development issues in Asia and the Pacific, and performing analytical work on project economic analysis and impact evaluation. Asian Development Bank (ADB) The Asian Development Bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 69 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. Follow Asian Development Bank (ADB) on Leave your question or comment in the section below: View the discussion thread.