Will Building New Cities Help the Recovery of the Indian Economy?

by Meghna Mohandas

In 2019, approximately 1/3rd of the Indian population lived in urban areas (Statista, 2019). It is estimated that by 2031, the rate of urbanisation is expected to hit 35% and by 2051, more than half of the country’s population will be living in the largest cities with a population of more than 1 million people. (Revi et al., 2020). The popularity of urbanisation as a tool for economic recovery in the post-pandemic context has attracted much discussion in policy circles (Pai et al., 2020). One of the key ideas for GDP growth is the building of new cities as this proposal, it is claimed, has the potential to foster employment and attract investment.

However, the analysis of empirical evidence indicates that developing new cities in India has failed to achieve projected results in the past. New cities require an average time frame of 30-50 years to achieve critical mass, and hence, this process would be unsatisfactory for immediate economic relief in the post-pandemic context. Chandigarh was proposed as the new planned capital of Punjab and Haryana in 1952 yet managed to cross the 1 million population mark only in 2011, 59 years after the plan was initiated. A similar example is that of Bhubhaneshwar, which was planned as the new capital of Orissa in 1949 but achieved a population of 0.9 million only in 2011. Economic diversity is another key issue concerning the creation of new cities and is aggregated when the planning rationale is to create uni-sectoral hubs, such as Jamshedpur and Durgapur. In the post-liberalisation period, government investments in Naya Raipur (initiated in 2000) are experiencing long gestational periods and the city has only achieved a population of 0.1 million in 2011. Lavasa is another example of a failed greenfield development through private sector investment — the hyped tourist town in Maharashtra has failed to achieve any critical mass in its 20 years of development (Revi, et al., 2020). It is also facing challenges regarding environmental clearance and land acquisition due to evictions of small landowners, which are two major issues regarding the promotion of greenfield development in India (Balakrishnan, 2019).

One alternative to utilise the potential of urbanisation in India is to expand existing urban agglomerations and plan expansions in the peri-urban areas surrounding the most urbanised cities in the country (Balakrishnan, 2019). The expansion of the urban boundaries would speed up the process of urbanisation that peri-urban areas surrounding these major cities would inevitably experience (Revi, et al., 2020). By absorbing existing densities and housing/infrastructure requirements, the proposal to develop satellite cities would eliminate the need to create demand, a key criterion for the success of urban development projects.

One example of a city that aimed to decongest itself is Navi Mumbai. However, what we must learn from the failure of this city to achieve its objective is that public transportation and connectivity is a key aspect that must be addressed in the planning process (Revi, et al., 2020). Another failure in the planning process is the lack of infrastructure for low-income migrant workers — a phenomenon that is observed in equal measure in both planned and unplanned cities in India.

By planning the expansion, the construction and real estate industry would be able to utilise various opportunities associated with infrastructure projects, which include, but are not limited to:

  1. Establishing extensive public transportation routes (trains and buses) across the expansion routes. This would enable connectivity and increase the value of the real estate in these neighbourhoods;
  2. Last-mile connectivity to residential and commercial areas, which would allow for more informal employment in the form of auto-rickshaw and cycle-rickshaw drivers;
  3. Development of residential units in the proposed satellite cities as people working in the IT and other sectors that allow for remote working (which has been popularised during the pandemic) would be willing to purchase housing. This would allow for increased demand in the construction and housing industry;
  4. Opportunities for development of infrastructure for low-income communities, particularly affordable housing, through the convergence of policies such as the PMAY(U) and the recently introduced ‘Affordable Rental Housing Complexes’ (AHRC) scheme; and
  5. Real estate development opportunities by utilising the value of land around the proposed metro and bus stations.

In conclusion, it is proposed that growth in the infrastructure and construction industry, key contributors to the national economy, be facilitated through the expansion of urban agglomerates as opposed to the building of new cities. As has been illustrated through this article, there is empirical evidence to establish the failure of new cities in achieving growth and contributing to the economy. In contrast, expansion projects of dense urban locations have higher potential to achieve the projected outcomes.


Balakrishnan, S. (2019). Shareholder Cities: Land Transformations Along Urban Corridors in India. University of Pennsylvania Press.

India: Degree of Urbanization from 2009 to 2019. Statista. (2020, October 20). https://www.statista.com/statistics/271312/urbanization-in-india/.

Pai, N., Manur, A., Pradhan, S., & Kanisetti, A. (2020, May). Takshashila Discussion SlideDoc: A Pathway for Post-Pandemic Economic Reconstruction. The Takshashila Institution. https://takshashila.org.in/takshashila-discussion-slidedoc-a-pathway-for-post-pandemic-economic-reconstruction/.

Revi, A., Ray, M., Sami, N., Anand, S., Mitra, S., & Malladi, T. (2020). Report to the XV Finance Commission on The Potential of Urbanisation to Accelerate Post-COVID Economic Recovery. Indian Institute of Human Settlements. https://iihs.co.in/knowledge-gateway/wp-content/uploads/2020/09/IIHS_XV_FC_Urbanisation_Report_Aug2020.pdf

Meghna Mohandas is an independent researcher working on issues of housing and urbanisation in India. She holds a bachelor’s degree in architecture from the School of Planning and Architecture, Bhopal and a postgraduate degree in urban sociology from the London School of Economics.

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