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India’s Urban Growth Is Moving Beyond Metro Cities
India’s cities are projected to contribute nearly 70% of national GDP by 2036, according to a World Bank estimate. This number is striking, but India’s metropolitan tier 1 cities still contribute the most and receive the most policy attention. Public investment, grants, and schemes often follow the same pattern. Mumbai, Delhi, Bengaluru, Chennai, Hyderabad, Kolkata, and Pune will remain India’s primary economic anchors. But a $40 trillion economy cannot be built on a handful of urban growth engines alone. The next layer of growth will have to come from the wider network of tier 2 and tier 3 cities and their surrounding economic regions. The data suggests that this shift is already underway.
Growth Is Moving Outward
The shift is already visible in MSME Udyam registration data, which shows that not a single top 10 district by MSME count is a metro city. Jalgaon, Ranchi, Visakhapatnam, and Muzaffarpur lead the list. India’s micro-enterprise economy is being built outside its big cities. These cities are the backbone of India’s small enterprise economy, producing goods, generating local employment, and feeding into national supply chains.
The spatial pattern studied in the Economic Survey 2025-26 for 16 cities shows that peripheral areas have consistently grown faster than urban cores between 2000 and 2020. Growth is moving outward. The economic hinterlands of large cities are expanding, and in many cases, that expansion is reaching smaller cities and towns located just beyond metro boundaries.
Economies Do Not Follow Municipal Boundaries
Urban policy in India has historically treated cities as administrative units. A city is often understood as its municipal boundary. But that is not how economies work. Coimbatore does not function in isolation. It anchors a textile and manufacturing belt that runs through Erode and Tirupur. Bhubaneswar’s economic reach extends into Cuttack and Puri. Varanasi connects a labour market, a tourism circuit, and a regional supply chain that no single city boundary can contain.
This is where the idea of a City Economic Region, or CER, becomes important. A CER maps the actual functional economic zone around a city: the hinterland it serves, the supply chains it anchors, and the labour markets it draws from. It shifts the unit of planning from administrative convenience to the economic reality of the region.
Integrated Regional Economies Show the Value of Regional Planning
Metropolitan economic regions have long shaped investment and growth planning in Europe, East Asia, and North America. China’s Greater Bay Area is a useful example. It integrated Shenzhen’s technology base, Dongguan’s manufacturing strength, and Huizhou’s land availability into a single economic region. This was a deliberate shift from rigid administrative boundaries to functional economic zones. The government built high-speed rail, shared power grids, and unified industrial policies to ensure that the region moved as one unit.
There are several other examples. The Rhine-Ruhr Region in Germany and the Randstad in the Netherlands show how multiple cities can function as one wider economic region. The Randstad connects Amsterdam, Rotterdam, The Hague, Utrecht, and smaller cities into a polycentric urban area. India has its own partial example in the Mumbai Metropolitan Region, which treats Mumbai, Thane, Navi Mumbai, Kalyan-Dombivali, and surrounding towns as one wider urban-economic region.
Making City Economic Regions Work
India has now begun to recognise this policy shift. The Union Budget 2026-27 introduced the CER to Indian urban policy. Seven clusters were identified, including Coimbatore-Erode-Tirupur, Bhubaneswar-Puri-Cuttack, and Varanasi, with an allocation of ₹5,000 crore per region over five years.
But policy recognition alone is not enough. India does not yet have a governance framework that matches the needs and vision of a CER. State governments plan within their own boundaries. Urban local bodies have limited fiscal and technical capacity. The Economic Survey notes that cities generate less than 0.6% of GDP in own-source revenues and depend heavily on intergovernmental transfers. Regional planning across districts and municipalities has no institutional backing.
The Economic Survey 2025-26 describes India’s urban story as one of “unfinished promise.” That phrase applies as much to tier 2 and tier 3 cities in India as it does to the metros. These regions have the economic capacity, but they now need policy backing, institutional support, empowerment, and training to realise the goal of Viksit Bharat.