Urban Governance & Climate Resilience in India: 3Fs Deficit, ULB Reforms & Financing Gaps

Strengthening urban governance is critical for India to build climate resilience, as the current state of cities reveals a significant gap between policy intentions and ground-level reality.

The Vision of Livable Cities

• Definition of Livability : The Economic Survey 2025-2026 emphasises the need for livable Indian cities, where the primary test of livability is a city’s ability to withstand climate shocks, such as floods and heatwaves.
• Existing Policies: Efforts have been made through policies to restore water bodies, implement heatwave action plans, promote sustainable mobility (Electric Vehicles), manage waste, and build climate-resilient infrastructure.

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The Current Crisis and Governance Failure

• Grim Reality: Despite multiple urban climate policies, nearly 1 in 7 deaths in Delhi is linked to air pollution, and 40% of Indian cities may face “Day Zero” groundwater crisis by 2030, reflecting severe urban vulnerability.
  • Day Zero refers to the moment when a city or region’s water supply falls so low that water taps are turned off, forcing authorities to ration water through emergency collection points.
• Sick Urban Governance: The fundamental hurdle is weak urban governance, marked by a lack of financial autonomy and institutional accountability, which prevents the effective implementation of resilience policies.

The “3 Fs” Deficit and Legislative Gaps

• Incomplete Devolution : Though the 74th Constitutional Amendment assigned 18 functions to Urban Local Bodies (ULBs), effective devolution remains weak.
  • As a result, ULBs continue to face deficits in the 3 Fs: Funds, Functions and Functionaries.
• Limited Decision-Making Authority : In core areas such as land use, water supply and climate resilient planning, ULBs function largely as implementing agencies.
  • The policy and regulatory powers remain concentrated with State governments or autonomous government agencies.
• Fiscal Constraints : Indian cities require nearly $260 billion by 2050 for climate-resilient infrastructure, yet ULBs lack adequate taxation powers and remain financially dependent on State transfers.

Failure of Market-Based Solutions

• Limited Success of Municipal Bonds: Despite being promoted as a financing tool, only 21 out of nearly 6,000 ULBs had issued municipal bonds (by Nov 2025), worth merely $42 million.
  • Example: The $42 million raised via municipal bonds is negligible compared to the $8 billion annual expenditure of the Brihanmumbai Municipal Corporation (BMC).
• Ineffective SPV Model: Special Purpose Vehicles (SPVs) under the Smart Cities Mission were intended to mobilise private capital but remain largely dependent on Central and State funding, failing to ensure financial autonomy.

Global Comparisons and Lessons

• China’s “Sponge Cities” Model: China has invested nearly $560 billion in urban infrastructure, including flood-mitigating Sponge Cities that enhance rainwater absorption and climate resilience.
• Land-Based Revenue Model: Chinese local governments hold urban land ownership and development rights, enabling revenue from land leasing and sales.
• Cautionary Lesson: However, excessive borrowing by local governments has created financial vulnerabilities, underscoring the need for ULB empowerment without unsustainable debt accumulation.

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Conclusion

India’s climate resilience challenge is a governance challenge. Without genuine devolution of Funds, Functions and Functionaries to Urban Local Bodies (ULBs) , cities will remain ill equipped to manage rising climate risks.

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