Union Budget 2026 Proposes Seven City Economic Regions with Rs 5,000 Crore Each
In a significant push for urban development, Union Finance Minister Nirmala Sitharaman announced the establishment of seven City Economic Regions (CERs) during her Budget 2026-2027 presentation on Sunday. Each CER will receive an allocation of Rs 5,000 crore over a five-year period, marking a strategic investment in India's urban growth engines.
Cities Selected for CER Development
The Budget identifies specific cities and clusters that will benefit from this initiative:
- Surat in Gujarat
- Varanasi in Uttar Pradesh
- Visakhapatnam (Vizag) in Andhra Pradesh
- Bengaluru in Karnataka
- Pune in Maharashtra
- The tricity cluster of Bhubaneswar-Puri-Cuttack in Odisha
- The tricity cluster of Coimbatore-Erode-Tiruppur in Tamil Nadu
For the initial year 2026-2027, the Budget has allocated Rs 2,000.01 crore for two new schemes: City Economic Regions and Regional Medical Hubs.
Implementation Strategy and Focus Areas
Finance Minister Sitharaman emphasized that cities serve as engines of growth, innovation, and opportunities. The CER initiative specifically targets Tier-2, Tier-3 cities, and temple towns that require modern infrastructure and basic amenities.
The implementation will follow a Public-Private Partnership (PPP) mode with a reform-cum-results based financing mechanism. Projects will be executed through challenge mode, which involves competition among bidders to ensure efficiency and innovation.
In her speech, Sitharaman highlighted CERs as one of six key areas for accelerating and sustaining economic growth:
- Scaling up manufacturing in seven strategic sectors
- Rejuvenating legacy industrial sectors
- Creating champion MSMEs
- Delivering a push for infrastructure
- Ensuring long-term security and stability
- Developing city economic regions
Broader Urban Development Allocations
The Budget 2026-2027 allocates Rs 85,222.39 crore to the Union Ministry of Housing and Urban Affairs. This represents a 49.5% increase from the revised estimate of Rs 57,203.78 crore in 2025-2026, though it shows an 11.93% decrease from the Budget Estimate of the previous year.
Other notable allocations include:
- Rs 4,000 crore for non-residential general pool accommodation (up from Rs 2,922.56 crore), reflecting ongoing Central Vista construction
- Rs 900 crore for the PM SVANidhi scheme (up from Rs 571.98 crore in revised estimates)
- Rs 3,000 crore for interest subsidy under Pradhan Mantri Awas Yojana-Urban 2.0 (down from Rs 3,500 crore)
Urban Challenge Fund Status
The Budget 2026-2027 allocates Rs 10,000 crore for the Urban Challenge Fund, matching last year's allocation. However, the fund announced in the previous Budget remains non-operational as rules for the challenge are still pending approval from the Ministry of Housing and Urban Affairs.
This comprehensive urban development strategy underscores the government's commitment to transforming India's urban landscape through targeted investments and innovative implementation models.
