Why Indian Cities Struggle: The Power Gap Between Mayors and Bureaucrats

Q: How can the proposed ‘accountable-CEO model’ improve urban governance in India?

The accountable-CEO model seeks to retain professional city management while introducing structured accountability mechanisms. It rests on three pillars: objective performance monitoring, clearly defined Key Responsibility Areas (KRAs) for city CEOs, and multi-level answerability to civil society, ward corporators, and the city council.First, annual, data-driven monitoring—covering indicators such as service delivery, safety, transport efficiency, and economic growth—would shift the CEO’s role from mere administrative control to outcome-oriented governance. Second, linking KRAs to incentives and rewards would align bureaucratic performance with urban development goals. Third, structured engagement with resident welfare associations and market bodies would enhance participatory governance.Countries like China also rely on bureaucrat-led city management, but they employ rigorous performance evaluation systems. Adapting such mechanisms within India’s democratic framework could combine administrative efficiency with public accountability, improving fund utilisation and development outcomes.

Reforming urban governance beyond just increasing funds

Surya

•March 3, 2026•6 mins read

Fixing accountability gap in India’s cities

Not Started

Urban Governance Reform: Beyond Financial Devolution to Structural Accountability

1. Strengthening Fiscal Transfers to Local Bodies

The 16th Finance Commission has significantly enhanced fiscal devolution to local governments, allocating nearly ₹8 trillion over five years, with 41% earmarked for urban local bodies (ULBs). This marks a substantial commitment to strengthening grassroots governance in line with the 73rd and 74th Constitutional Amendments.

Importantly, the Commission has attached core conditionalities to these grants:

Constitution of State Finance Commissions (SFCs)
Timely completion of audited accounts
Presence of elected local bodies

These conditions aim to improve institutional accountability and ensure that funds translate into measurable outcomes rather than fiscal leakage.

Parallelly, the Union Budget allocated ₹1 trillion to the Urban Challenge Fund, designed to catalyse investments in cities. Of this, 25% will be released only if the state government contributes an equivalent amount, while the remaining funds must be mobilised from market sources such as bonds, loans, and PPPs. This model incentivises fiscal responsibility and market discipline.

Financial strengthening is a necessary precondition for urban development. However, without institutional reform in governance structures, increased funds alone may not translate into improved urban outcomes.

2. Why Rural Areas Resist Urban Classification

Several rural areas resist conversion into urban local bodies. While it is often assumed that higher taxes or zoning restrictions deter such transitions, property taxes in India remain minimal, and urban conversion typically increases land values due to infrastructure improvements.

The deeper issue lies in power dynamics. Rural governments are politically controlled by elected representatives. However, urban governments function under significant bureaucratic control, with key executive authority vested in state-appointed officials.

By accepting urban status, local politicians effectively relinquish operational power to bureaucrats who report primarily to the state government rather than to the city electorate.

This structural shift explains resistance more convincingly than fiscal concerns.

Urbanisation in India is not merely a demographic transition but an institutional transition. If political actors perceive loss of authority, urban expansion will remain administratively constrained despite economic benefits.

3. The Core Governance Mismatch: Authority vs Accountability

India’s urban governance structure suffers from a systemic mismatch. The elected mayor and municipal councillors, who are accountable to citizens through elections, possess limited executive authority. Conversely, the city’s Chief Executive Officer (CEO)—a bureaucrat—controls administration and reports to the state government.

This results in:

Authority resting with non-elected officials
Accountability resting with elected representatives

Such asymmetry produces governance failures, delays in decision-making, and weakened fiscal autonomy. It also affects fund flows and resource utilisation, as bureaucratic priorities may not align with local electoral mandates.

Over 75 years of Independence, no state government has meaningfully delegated executive powers to city-level political heads, despite constitutional provisions allowing decentralisation.

“Democracy is not a spectator sport.” — Marian Wright Edelman

This highlights the principle that democratic accountability must be accompanied by effective authority.

When those accountable to citizens lack authority, governance deficits become structural rather than incidental. Without correcting this imbalance, financial reforms will yield limited results.

4. Political Economy of Urban Control

Although civil society and academia widely advocate for an empowered-mayor model, state governments and bureaucracies have shown reluctance to devolve authority.

Chief Ministers may resist decentralisation as it reduces state-level political control over cities. Bureaucrats may prefer reporting to state or national authorities that influence career progression.

Thus, there exists an unstated consensus across political and administrative elites favouring continued centralised control over cities.

Comparatively, many countries follow an empowered-mayor system, while countries like China retain bureaucratic leadership but with clearly defined performance metrics and accountability structures.

Challenges to Reform:

Bureaucratic resistance
Political reluctance at state level
Career incentives tied to state/national reporting lines
Institutional inertia

Urban governance reform is constrained not by constitutional design but by political economy realities. Without aligning incentives, structural change will remain unlikely.

5. Limits of the Empowered-Mayor Model in India

The empowered-mayor model, widely practised internationally, grants substantial executive authority to elected city leaders. However, in India, its adoption faces significant resistance from entrenched power centres.

Transferring hiring and firing powers over city CEOs to mayors could rebalance authority. Opening CEO positions to professional managers, including from outside the bureaucracy or even internationally, could enhance efficiency.

Yet such reforms may provoke institutional pushback and political opposition, making immediate implementation politically infeasible.

Reforms that significantly alter power distribution often face high resistance. A feasible alternative must work within India’s existing institutional realities rather than against them.

6. The Accountable-CEO Model: A Pragmatic Alternative

Given the constraints on political devolution, the article proposes an “accountable-CEO model” as a middle path.

This model would retain bureaucratic leadership but embed strong accountability mechanisms through:

Annual objective performance monitoring of cities
Clearly defined Key Responsibility Areas (KRAs) for CEOs
Reward and incentive mechanisms linked to performance
Multi-tiered accountability:
- Civil society and resident associations at neighbourhood level
- Ward corporators at ward level
- City council at city level

Unlike some countries where bureaucrat-led cities operate under clear evaluation frameworks, Indian city CEOs lack systematic performance assessment mechanisms tied to outcomes.

Expected Outcomes:
- Shift from administrative maintenance to development orientation
- Improved public services (transport, safety, public spaces)
- Stronger feedback loops
- Better utilisation of fiscal transfers

Performance-linked accountability can align bureaucratic authority with public interest. Without measurable incentives and citizen oversight, administrative inertia will persist despite increased funding.

7. Linkages to Constitutional and Economic Governance

The debate intersects multiple GS dimensions:

GS-II (Polity & Governance):
- 74th Constitutional Amendment
- Decentralisation
- Federalism and state-local relations
- Institutional accountability
GS-III (Economy & Infrastructure):
- Urban financing
- Municipal bonds
- Public-private partnerships
- Resource efficiency

Urban governance quality directly impacts economic productivity, investment climate, and quality of life. Cities are engines of growth; governance inefficiencies reduce their economic contribution.

“The city is the engine of growth.” — World Bank (Urban Development literature)

If governance structures remain misaligned, fiscal devolution will produce suboptimal returns on public investment.

8. Way Forward

Sustain fiscal strengthening through Finance Commission transfers
Ensure effective implementation of conditionalities (SFCs, audits, elected bodies)
Develop objective city performance monitoring frameworks
Define KRAs and performance-linked incentives for city CEOs
Institutionalise structured citizen accountability mechanisms
Gradually experiment with enhanced mayoral authority where politically feasible
Encourage market-based financing while improving governance capacity

Conclusion

India has begun addressing urban financial constraints through enhanced devolution and catalytic funding mechanisms. However, the deeper challenge lies in resolving the mismatch between authority and accountability in city governance. A pragmatic accountable-CEO framework, supported by performance metrics and citizen oversight, may offer a politically feasible path toward better urban outcomes. Ultimately, aligning fiscal empowerment with institutional reform will determine whether Indian cities evolve into engines of inclusive and sustainable growth.

Quick Q&A

Everything you need to know

The 16th Finance Commission has significantly enhanced fiscal transfers to local governments, allocating nearly ₹8 trillion over five years, with about 41% earmarked for urban local bodies (ULBs). This marks a recognition of rapid urbanisation and the need to strengthen cities as engines of growth. Importantly, these grants are not unconditional; they are tied to institutional reforms such as the constitution of State Finance Commissions (SFCs), timely completion of audited accounts, and the presence of elected local bodies.

These conditionalities are designed to address chronic weaknesses in urban fiscal governance. Regular SFCs ensure predictable devolution from states to cities. Audited accounts enhance transparency and creditworthiness, which is crucial if cities are to access market borrowings. The requirement of elected bodies ensures democratic legitimacy. Together, these measures aim to move cities from ad hoc grant dependence toward institutionalised fiscal federalism.

However, while these reforms strengthen financial architecture, they do not directly address the deeper issue of governance—namely the imbalance between political accountability and administrative authority in cities.

At first glance, resistance to urban classification appears counterintuitive, since urban status brings improved infrastructure, rising land values, and greater economic opportunity. Explanations such as fear of higher property taxes or restrictive zoning regulations are often cited, but these factors are relatively minor in India, where property tax rates remain low and landowners often benefit from appreciation.

The deeper issue lies in political economy dynamics. Rural governments are controlled by elected representatives who wield substantial authority. In contrast, urban governments often vest significant executive powers in a state-appointed bureaucrat (City CEO or Municipal Commissioner). When a rural area becomes urban, political control effectively shifts from local politicians to bureaucrats accountable to the state government.

Thus, the resistance reflects a rational calculation by rural politicians who are reluctant to surrender authority. This highlights a structural flaw in India’s urban governance system—a mismatch between authority and accountability—which discourages organic urban transition and undermines decentralisation.

India’s urban governance framework is characterised by a structural contradiction: the Mayor and municipal councillors, who are directly accountable to citizens, often possess limited executive authority. In contrast, the Municipal Commissioner or CEO, typically a state-appointed bureaucrat, wields substantial administrative and financial powers but is accountable primarily to the state government.

This mismatch leads to governance inefficiencies. Elected representatives must depend on bureaucrats to implement projects, causing delays and blame-shifting. It weakens responsiveness to local needs, whether in sanitation, public transport, or urban planning. Moreover, since bureaucrats’ career progression depends on state governments, city-level priorities may not receive focused attention.

While some argue that bureaucratic leadership ensures professionalism and continuity, the absence of clear performance metrics and citizen accountability dilutes effectiveness. The result is persistent urban underperformance, necessitating repeated financial interventions by the Union government and Finance Commission.

The accountable-CEO model seeks to retain professional city management while introducing structured accountability mechanisms. It rests on three pillars: objective performance monitoring, clearly defined Key Responsibility Areas (KRAs) for city CEOs, and multi-level answerability to civil society, ward corporators, and the city council.

First, annual, data-driven monitoring—covering indicators such as service delivery, safety, transport efficiency, and economic growth—would shift the CEO’s role from mere administrative control to outcome-oriented governance. Second, linking KRAs to incentives and rewards would align bureaucratic performance with urban development goals. Third, structured engagement with resident welfare associations and market bodies would enhance participatory governance.

Countries like China also rely on bureaucrat-led city management, but they employ rigorous performance evaluation systems. Adapting such mechanisms within India’s democratic framework could combine administrative efficiency with public accountability, improving fund utilisation and development outcomes.

If advising the Union Government, I would recommend linking fiscal transfers—such as those under the Urban Challenge Fund—to governance reforms. For instance, release of funds could be made conditional upon the delegation of specific executive powers to elected mayors or the adoption of performance-based CEO evaluation systems.

Second, the Union government could incentivise states to allow cities greater autonomy in hiring professional city managers, potentially even from outside the traditional bureaucracy. This would foster managerial innovation and global best practices. Third, performance-based grants could reward cities achieving measurable improvements in sanitation, air quality, and infrastructure delivery.

Such a calibrated approach would respect India’s federal structure while nudging states toward reform. Ultimately, fiscal empowerment must go hand in hand with governance restructuring; otherwise, increased fund flows alone will not transform India’s urban landscape.