India’s rapid urbanisation has created an urgent demand for infrastructure investment, yet recent budgetary trends reveal a paradox of rising needs but declining allocations. This paper examines the Union Budget 2026–27 in the context of twelve years of Government of India (GoI) data on urban sector schemes, highlighting phases of growth, stagnation, and decline in both allocations and actual fund releases. While initiatives such as the Urban Infrastructure Development Fund, Urban Challenge Fund, and the newly announced City Economic Regions (CERs) signal recognition of cities as engines of growth, the overall budgetary allocation for 2026–27 has fallen by 25% compared to the previous year, marking the first negative growth in urban sector funding. The analysis shows widening gaps between allocations and actual expenditure, with basic infrastructure services and housing schemes particularly affected, while metro projects remain comparatively protected. By situating these trends against projected urbanisation and global benchmarks, the study raises critical questions about whether the urban sector is losing priority in national policy and explores the underlying demand- and supply-side constraints that contribute to the paradox of rising needs but declining allocations.

Dr Ravikant Joshi, Senior Fellow, Urban Finance & Governance, at the Centre for Public Policy Research (CPPR), Kochi, Kerala, India.

Views expressed by the authors are personal and need not reflect or represent the views of the Centre for Public Policy Research.

Dr Ravikant Joshi

Senior Fellow (Urban Finance & Governance) at CPPR | [email protected] |  + postsBio

Dr. Ravikant Joshi is an Urban Finance specialist with over 35 years of experience, including as Chief Accounts Officer of Vadodara Municipal Corporation. He led key municipal financial reforms, including implementing accrual-based accounting across 159 urban bodies in Gujarat, and has worked with major national and international organisations while contributing to urban issues and public awareness.

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