Arvind Panagariya, Chairman of the 16th Finance Commission, has outlined that India must reach 60% urbanisation by 2047 to achieve developed economy status. The plan involves shifting focus to state-led reforms and creating new jobs to move the workforce away from agriculture.
To achieve developed nation status by 2047, India must significantly accelerate its urbanisation rate to at least 60%, according to Arvind Panagariya, Chairman of the 16th Finance Commission. Speaking at the NCAER India Policy Forum in August 2026, Panagariya noted that global historical evidence shows no country has attained developed status without reaching a similar level of city-based living.
Currently, India’s urbanisation levels are well below this benchmark, with a large portion of the workforce still tied to agriculture. Panagariya highlighted that as of 2023-24, about 46% of the workforce remains in the agriculture sector. He suggested that for the economy to grow efficiently and boost productivity, this figure must drop closer to 25% over the coming decades.
The Shift to State-Led Reforms
A central part of this strategy is the shift in policy focus toward state governments. Panagariya emphasised that urban policy, land management, and zoning regulations are primarily under the control of states. To attract businesses and encourage rural-to-urban migration, states will need to reform land acquisition and building bylaws. He proposed that creating specific employment-focused regions could act as a catalyst for job creation, which is essential to support a larger urban population.
Economic and Infrastructure Challenges
While the goal is clear, the path to rapid urbanisation presents significant hurdles. Experts and policymakers have noted that Indian cities often struggle with severe infrastructure gaps, such as inadequate housing, water supply, and transportation, which could be strained further by a massive influx of new residents. Additionally, many urban local bodies operate under tight fiscal constraints, limiting their ability to invest in the necessary infrastructure to manage such growth effectively.
There is also the economic challenge of managing the transition. Moving a large portion of the population out of agriculture requires a robust manufacturing and service sector capable of absorbing these workers. Without adequate job creation, there is a risk of rising urban underemployment, which could dampen overall consumption and economic stability.
Investors may track how state governments implement these structural reforms over the next few years. The focus will likely remain on policy announcements related to land use, municipal finance, and infrastructure spending, as these are expected to be key indicators of whether the country can hit these long-term urbanisation targets.