Indian cities lag global peers; Bengaluru emerges despite weak infra, driven by entrepreneurial ecosystem: Economic Survey

Bhuvan data from ISRO show Mumbai and Bengaluru have limited growth in dense cores but expanded significantly into semi-urban and peri-urban areas.

• Bengaluru's tech growth driven by talent, networks, and flexible governance
• India's cities lag in productivity and liveability despite rapid growth.
• Congestion costs Indian metros billions; public transport and planning are key.

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Bengaluru, despite weaker infrastructure than Delhi or Mumbai, has emerged as India’s Silicon Valley, benefiting from dense talent pools, entrepreneurial networks, and institutional openness, according to Economic Survey 2025-26.

The city’s growth was anchored in early concentrations of engineering institutions, skilled labour, and rising wages, creating a modern, innovation-led ecosystem.

Urban growth lags global peers

India’s urban population has expanded rapidly, with metropolitan regions like Mumbai, Delhi, Bengaluru, Chennai, and Hyderabad now among the world’s largest. Yet population scale has not proportionately boosted productivity, liveability, or global influence. In advanced and emerging economies, only a few Metros function as nodes in global production, finance, logistics, and knowledge ecosystems. Despite India’s economic scale, its cities struggle to perform this role at the level of global peers such as New York, London, Shanghai, or Singapore.

Citing urban economist Edward Glaeser’s The Triumph of Cities, the Survey states that a 10-percentage-point increase in college graduates in a city is linked to a 0.5-1 percentage point increase in annual population and income growth. This explains why infrastructure-heavy cities do not automatically prosper. Detroit, which invested heavily in highways and factories, faced stagnation and population decline, while Boston, with narrow streets and older housing but dense universities, successfully transitioned to finance, biotech, and knowledge industries - a trajectory Bengaluru has mirrored.

Software success and flexible governance

Bengaluru’s rise traces back to a pivotal shift in electronics and software policy. From the 1960s to early 1980s, the sector was constrained by state control and import substitution. Mid-1980s reforms recognised software as an industry, eased regulations, relaxed foreign exchange and import rules, and invested in technical education, telecom infrastructure, and technology parks.

Bengaluru became a testing ground: the approval of Texas Instruments’ offshore centre marked a turning point, enabling a fragmented but dynamic ecosystem without creating protected champions.

Liveability beyond infrastructure

The Survey states that liveability is more than infrastructure. True urban quality arises when cities are designed around people’s time, choices, and creativity. Union Ministry of Housing and Urban Affairs’ Ease of Living Index measures education, health, housing, water, sanitation, mobility, safety, and recreation.

In 2025, top-ranked cities - Pune, Navi Mumbai, Greater Mumbai, Tirupati, Chandigarh, Thane, Raipur, Indore, Vijayawada, and Bhopal - were largely newer or Tier-2 centres less burdened by population pressures. Greenfield cities like Amaravati allow planners to shape growth deliberately, avoiding congestion and informality.

Urbanisation spreads outward

Night-time light data from ISRO’s Bhuvan platform shows metropolitan growth is increasingly peripheral. Mumbai and Bengaluru expanded mainly in semi-urban and peri-urban zones, while Pune and Hyderabad grew in both dense cores and fringes. Peripheral growth outpaced core areas between 2000 and 2020, highlighting the need for metropolitan-scale planning. Research shows urban expansion follows transport corridors, converting agricultural land to non-agricultural use, with suburbs shaping housing demand, labour markets, and infrastructure needs.

Congestion as the productivity tax

Despite innovation, mobility failures impose heavy economic costs. Bengaluru lost around 7.07 lakh productive hours in 2018 due to congestion, equating to Rs 11.7 billion. Across Delhi, Mumbai, Bengaluru, and Kolkata, congestion costs reached $22 billion annually. The Survey attributes this to over-dependence on private vehicles. Solutions include high-capacity public transport, safe walking and cycling, demand-based parking, and transit-oriented development.

The future city: creative, humane, interconnected

Time should be treated as the most valuable urban resource, with neighbourhoods planned to minimise travel for work, education, and healthcare. Streets should act as social infrastructure, safe and welcoming for all.

Fostering creative density is crucial. Indian cities are culturally rich but often hostile to art, music, and street culture due to restrictive rules. Protecting spaces for expression is key to attracting and retaining skilled workers and entrepreneurs.

The Survey concludes that India’s urban challenge is not just scale, but intent. Cities must be recognised as economic infrastructure, supported by strong governance, predictable enforcement, and empowered finances.