In Part I of the special edition of Akhil Vaani on the Union Budget, I discussed ten key macro messages, while Part II focused on the core infrastructure sectors that account for the bulk of the Union Government’s mega Rs 12.2 lakh crore capex push.

The concluding Part III analyses the thrust in the remaining focus areas, along with a critical assessment of gaps and any missteps.

I begin with two critical areas — the urban and rural focus of the Budget.

Urban Sector – Right Intent, Low Allocation

Firstly, the context: The Economic Survey 2025–26 emphasised transforming India’s urban areas into economically vibrant, equitable and sustainable hubs through integrated planning and infrastructure. It also underscored the critical need for a systems approach in future urban policy to integrate housing, mobility, sanitation, climate resilience and municipal finance, delivering performance outcomes rather than mere infrastructure. In a nutshell, it visualised cities as economic assets driving national output, with better governance to fix land-market distortions.

This leads me to question how the Union Budget 2026–27 fares with regard to the critical needs of the urban sector, particularly in view of the most recent July 2025 World Bank report, Towards Resilient and Prosperous Cities in India, which notes that India’s urban population is expected to surge, with approximately 600 million people living in cities by 2036. By 2050, this number is projected to nearly double from 2020 levels, reaching 951 million.

Secondly, key focus areas: Ostensibly, the 2026–27 Union Budget addresses urban-sector challenges through targeted investments in economic agglomeration and infrastructure.

Budget priorities emphasise City Economic Regions (CERs) in Tier II and Tier III cities and temple towns, with Rs 5,000 crore per region over five years for reform-linked plans to boost growth clusters. High-speed rail corridors and inland waterways aim to enhance inter-city connectivity, while metro projects continue to dominate urban mobility funding.

Support for housing under PMAY-Urban and sanitation under the Swachh Bharat Mission continues, but cuts signal a shift towards performance-based urban finance amid climate and migration pressures.

Thirdly, sub-par budgetary allocations: The total allocation of the Union Budget for urban development in 2026–27, instead of an urgently required substantial increase, marks a significant 11.6 per cent reduction from the revised estimate for the 2025–26 fiscal year. The following are the key details of urban sector allocations:

In addition, the 2026–27 Budget introduces a “Rs 1 lakh crore" Urban Challenge Fund for sustainable, climate-resilient infrastructure.

By 2050, India’s urban population will be 951 million, according to the World Bank. This will require the creation of many greenfield smart cities, as well as substantially upgrading existing cities. Also, nearly three-fourths of the infrastructure required to meet this challenge is yet to be built. That is a gigantic task.

Clearly, the budgetary allocation falls abysmally short of the urban challenges posed by rapid urbanisation, infrastructure gaps and climate risks, as cuts hit basic services. The traditional paradigm of treating cities as residual priorities, despite their disproportionately high GDP contributions, continues to perpetuate itself as a self-fulfilling prophecy.

Fourthly, the litany of woes just got compounded: As clearly brought out by the Economic Survey, utilising the European Commission’s Global Human Settlements Layer (GHSL) satellite data, India’s real urbanisation footprint has become significantly higher than official Census figures suggest. Here are the findings:

The Survey highlighted that this “de facto" urban nation requires a major shift in policy to focus on functional urban areas rather than just statutory town boundaries. Conversely, the Union Budget misses the big picture altogether and continues to perpetuate the traditional anti-urban paradigm, treating cities and towns as residual areas of interest with abysmally low allocations compared to the resource-guzzling, low-performing rural areas.

Fifthly, crippling urban mobility gridlock: Even a cursory look at the Seventh Schedule of the Constitution of India makes it clear that urban transport — urban mobility is a constitutional orphan whose responsibility rests with none: the central, state or city governments.

Unsurprisingly, then, despite urban India contributing more than two-thirds of GDP — which is likely to increase to 70 per cent by 2030 and above 80 per cent by 2047 — it faces crippling urban mobility gridlock.

People-centric urban mobility prioritises pedestrians, cyclists and public transport users over private vehicles to reduce congestion, enhance safety and promote equity in Indian cities. The Economic Survey 2025–26 rightly critiques vehicle-centric policies and advocates a shift to integrated systems aligned........

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