Challenges to Effective Urban Governance in India: Key Impediments

India is urbanising faster than at almost any point in its history, and its cities are expected to house a far larger share of the population in the coming decades. Yet the institutions meant to run these cities, the Urban Local Bodies (ULBs), often struggle to deliver even basic services like clean water, reliable sanitation, and well-maintained roads. The reasons are rarely about a lack of effort by municipal staff. They are structural. Three decades after a landmark constitutional reform promised empowered city governments, several deep-rooted impediments continue to weaken urban governance. This post breaks down the most significant of these barriers, grouped into problems of decentralisation, finance, and day-to-day operations.

The promise and the gap in decentralisation 🔗

The starting point for any discussion on urban governance is the 74th Constitutional Amendment Act of 1992. It gave constitutional status to municipalities and established them as the third tier of government in towns and cities. The amendment listed 18 functions in the Twelfth Schedule, including urban planning, regulation of land use, water supply, public health, and slum improvement, that states were expected to hand over to ULBs. The idea was simple: decisions about a city should be taken by the people closest to it.

In practice, this transfer of power has been slow and incomplete. The framework rests on the devolution of what are often called the three Fs: Functions, Funds, and Functionaries. Without all three, a ULB has responsibility on paper but no real authority to act.

Incomplete devolution of functions 🔗

More than thirty years after the amendment came into force, devolution remains partial and uneven across states. A recent audit by the Comptroller and Auditor General of India found that while most of the 18 functions had been formally devolved, only four were effectively transferred with complete autonomy. Critical functions such as urban planning, slum rehabilitation, and fire services often stay with the state government. This means a city government may be blamed for poor planning while having very little actual control over it.

Overlap with parastatal bodies 🔗

One of the biggest reasons functions remain hollow is the presence of parastatal bodies. These are agencies like development authorities, water boards, and slum clearance boards that are created by and accountable to the state government, not to elected city councils. They frequently carry out the very functions the Constitution intended for ULBs.

The case of Bengaluru, analysed by PRS Legislative Research, illustrates this clearly. Land regulation there is handled by a development authority and slum rehabilitation by a separate clearance board, even though both are listed as municipal functions. When several agencies share responsibility for the same city without clear lines of accountability, coordination breaks down and citizens are left unsure about who is responsible for what.

Political and administrative centralisation 🔗

State governments have generally been reluctant to part with control. A study prepared for the National Institute of Urban Affairs notes that genuine devolution remains a distant goal, with city governments subject to substantial control by states that limits their growth, as discussed in this analysis of the 74th Amendment’s impact. Because municipal staff are often deputed from state services, they tend to remain accountable to the state bureaucracy rather than to the mayor or council they serve. This tension between elected representatives and appointed officials quietly undermines local self-government.

The financial constraints that cripple city governments 🔗

Even where functions are devolved, ULBs cannot perform them without money. Financial weakness is arguably the single most damaging impediment to effective urban governance, because it makes every other problem harder to solve.

Heavy dependence on grants and transfers 🔗

Indian municipalities raise very little of their own income and lean heavily on the state and central governments. The Reserve Bank of India’s Report on Municipal Finances found that own-source revenues are inadequate to meet the revenue expenditure of most corporations, limiting their operational and financial flexibility. When a city government must wait for grants to arrive before it can act, it loses the ability to plan and respond independently.

The scale of the problem is striking. The combined budget of all municipal corporations in India is tiny compared with state and central budgets, and total municipal revenue receipts have hovered at well under one percent of GDP for years. This is far smaller than what comparable cities in other emerging economies manage to raise.

Weak revenue collection and the property tax problem 🔗

With many of their traditional taxes taken over or subsumed over the years, urban local governments are left with property tax as their main local tax. The study on the state of municipal finances prepared for the Fifteenth Finance Commission highlights how this overdependence, combined with the under-assessment and poor collection of property tax, starves cities of funds. Properties are often valued far below their market worth, and a large share of tax that is due is never actually collected.

This is a missed opportunity. Tools like GIS-based property mapping, rationalised user charges for water and waste, and value capture financing could expand municipal income considerably. But many ULBs lack either the capacity or the political will to pursue them.

Budgetary deficits and limited borrowing 🔗

The financial picture varies sharply across the country. Some states run surpluses while others, including large states, face significant municipal deficits. A further constraint is that municipalities borrow very little, partly because few have strong enough credit ratings to issue municipal bonds. A large portion of municipal spending also goes towards salaries, pensions, and administration, leaving limited room for the capital investment that cities urgently need for infrastructure.

Operational and public participation challenges 🔗

The final set of impediments concerns the everyday capacity of ULBs to function and their relationship with the citizens they serve. Money and powers mean little if the institution cannot use them well or if residents have no say in how they are used.

Staffing and capacity shortages 🔗

Municipal administration across India suffers from chronic understaffing and skill gaps. Many ULBs lack trained engineers, planners, and finance professionals needed to design and run complex urban projects. As an analysis by the Observer Research Foundation explains, a mix of inadequate staff strength and skills, ambiguity in responsibilities, weak transparency, and conflicting statutes prevents city governments from being responsive to residents. Because recruitment is often controlled by the state, ULBs cannot freely build the teams they need.

Transparency and accountability gaps 🔗

Weak transparency compounds the staffing problem. Citizens frequently cannot access basic information about council proceedings, budgets, or development projects. When governance is opaque, it becomes difficult to hold anyone accountable for poor service delivery, and the space for corruption and inefficiency widens. Delayed municipal elections make this worse, since unelected administrators running a city for extended periods further dilute democratic accountability.

The participation deficit 🔗

The 74th Amendment envisioned active citizen involvement through Ward Committees and area sabhas, treating these as the bridge between residents and municipal authorities. In reality, these institutions are weak or non-functional in most cities. A commentary in Mongabay India points out that although the legal architecture exists, implementation has been patchy, and many ward committees and area sabhas remain non-operational or meet rarely, with their recommendations routinely ignored.

Very few states have enacted strong community participation laws or mandated public consultation on city budgets. This participation deficit hits marginalised groups hardest, including slum dwellers and migrant workers, who often need municipal services the most but have the least power to demand them. The result is a cycle where policies fail to reflect community needs, trust erodes, and engagement falls even further.

How these impediments connect 🔗

It would be a mistake to treat these three areas as separate problems. They reinforce one another. Incomplete devolution leaves cities without clear authority. Weak finances mean they cannot recruit skilled staff or invest in infrastructure. Limited capacity and poor transparency discourage citizens from participating. And without an engaged public demanding better, there is little pressure on states to devolve genuine powers in the first place. Fixing urban governance therefore requires working on all three fronts at once rather than treating any one as a quick fix.

What do you think? Which of these impediments, weak devolution, fragile finances, or limited public participation, do you believe is the most urgent to address in your own city? And what is one practical reform that you think could meaningfully strengthen the link between residents and their local government?

References

1. https://en.wikipedia.org/wiki/Seventy-fourth_Amendment_of_the_Constitution_of_India
2. https://theprint.in/india/governance/over-30-yrs-after-74th-amendment-cag-flags-weak-compliance-with-law-empowering-urban-local-bodies/2357067/
3. https://prsindia.org/theprsblog/examining-urban-local-governance-in-india-through-the-case-of-bengalurua
4. https://niua.in/sites/default/files/2025-07/2024_2_%20Impact%20of%20the%2074th.pdf
5. https://www.rbi.org.in/scripts/PublicationsView.aspx?Id=22742
6. https://fincomindia.nic.in/asset/doc/commission-reports/15th-FC/reports/studies/State%20of%20Municipal%20Finances%20in%20India.pdf
7. https://www.orfonline.org/expert-speak/the-role-of-the-central-government-in-strengthening-urban-local-self-governance
8. https://india.mongabay.com/2026/05/better-urban-services-require-citizen-participation-commentary/