NEW DELHI: Calling cities India’s “engines” of growth, innovation and opportunity, the Centre on Sunday said it will step up its focus on tier 2 and tier 3 cities and even temple towns that require modern infrastructure and basic amenities.
Presenting the Union Budget 2026–27, Finance Minister Nirmala Sitharaman said the government aims to “further amplify” the economic potential of cities by harnessing agglomeration benefits through a new framework of City Economic Regions (CERs). These regions will be mapped based on their specific growth drivers, such as manufacturing, tourism, services or logistics.
To operationalise the plan, Sitharaman announced an allocation of Rs 5,000 crore per CER over five years, to be deployed through a challenge mode linked to reforms and measurable outcomes. The reform-cum-results-based financing mechanism is intended to incentivise states and urban local bodies to plan and execute projects more efficiently.
“Cities are India’s engines of growth, innovation and opportunities. We shall now focus on tier II and tier III cities, and even temple towns, which need modern infrastructure and basic amenities,” the Finance Minister said in her Budget speech.
The urban push was part of a wider set of announcements spanning agriculture, finance, health, employment, industry and tourism, with the emphasis on spreading growth beyond large metropolitan centres.
Temple towns, in particular, were highlighted as requiring targeted investments to cope with rising footfalls, infrastructure stress and service delivery gaps. Tamil Nadu, home to several major pilgrimage centres such as Rameswaram, Madurai, Kancheepuram and Kumbakonam, stands to be a key beneficiary of this focus.
The CER approach, the government said, is aimed at aligning urban planning with local economic strengths, improving coordination across municipal boundaries, and unlocking private investment.