Urbanisation as an Engine of Economic Growth in India: Revisiting the City–Productivity Nexus in the Context of Economic Survey 2025–26

DOI- https://doi.org/10.5281/zenodo.23042943

Abstract

India's cities generate a strikingly large share of national output from a small share of national land, yet they are widely described as falling short of what cities elsewhere have achieved. The Economic Survey 2025–26 calls this an "unfinished promise": the population has arrived, the productivity has not fully followed. This paper surveys the evidence behind that judgement. It examines what economists mean when they say cities make people more productive, asks how urban India really is once we look past the Census definition, reviews the empirical record on whether Indian cities deliver the productivity gains that theory predicts, and considers the two constraints most often blamed for the shortfall: inadequate infrastructure and financially powerless municipal governments. The picture that emerges is not one of a failed urbanisation. It is one in which the machinery of urban productivity has been built but never properly switched on.

Keywords: Urbanisation, Agglomeration, Labour Productivity, Municipal Finance, Indian Cities, Economic Survey 2025–26