India’s Urban Surge: accounts for 70% of GDP in FY26: Dun & Bradstreet report

• Urban areas projected to contribute 70% of India’s GDP in 2025–26, up from 45% in the 1990s.

• Urban population expected to reach 600 million (40%) by 2036.

• Urban local bodies increased 8.56% between 2016 and 2025.

• Tier-II and Tier-III cities emerging as investment and employment hubs.

• Budget 2026–27 allocates ₹5,000 crore per city region.

• Ahmedabad leads growth; Pune tops MSME registrations.

India’s cities are poised to play an even more decisive role in shaping the country’s economic future. According to a recent City Vitality Index (CVI) report released by Dun & Bradstreet for the first quarter of 2026, urban centres are expected to generate 70 per cent of India’s gross domestic product in 2025–26 — a dramatic rise from their 45 per cent contribution in the 1990s.

The findings underscore the rapid pace of urbanisation underway across the country. By 2036, India’s urban population is projected to reach 600 million people, accounting for roughly 40 per cent of the total population. This marks a substantial increase from 2011, when urban residents made up 31 per cent of the population. The report indicates that this shift is not slowing down; rather, the momentum is likely to intensify in the years ahead.

Evidence of this accelerating transition can be seen in the growing number of urban local bodies. Between 2016 and 2025, their count rose from 4,567 to 4,958 — an increase of 8.56 per cent in just eight years. This administrative expansion reflects both demographic growth and the widening footprint of urban governance.

A particularly notable trend highlighted in the report is the rise of Tier-II and Tier-III cities, referred to as Class Y cities. These smaller urban centres are increasingly being viewed as attractive destinations for global capability centres. Their emergence is expected to unlock new waves of investment while creating employment opportunities beyond the traditional metropolitan strongholds.

The report’s release coincides with a strong policy push from the Union government. In the Union Budget for 2026–27, Finance Minister Nirmala Sitharaman announced a significant allocation aimed at strengthening city-driven development. The plan earmarks ₹5,000 crore over five years for each designated city economic region, focusing on the growth of Tier-II and Tier-III cities, including prominent temple towns. This move signals a strategic effort to broaden the base of urban prosperity.

Among major metropolitan areas, Ahmedabad emerged as the fastest-growing city, with Bengaluru and Delhi following close behind. Pune, meanwhile, stood out for a different reason: it recorded the highest number of Udyam registrations among large cities, reaching 620,000. The Udyam portal serves as the government’s digital platform for registering and classifying micro, small and medium enterprises (MSMEs), making it a key indicator of entrepreneurial activity.

In the category of emerging cities, North 24 Parganas secured the top position, followed by Thane and Jaipur. Thane led this group in terms of Udyam registrations, with 430,000 enterprises formally recognised under the MSME framework.

The CVI evaluates and ranks the top 100 non-metropolitan cities by assessing their economic scale, growth trajectory and overall dynamism. The rankings reveal important distinctions between size and momentum. A city that ranks high in economic scale but lower in growth may be approaching maturity, expanding at a more moderate pace. Conversely, cities with modest size rankings but strong growth scores are often considered rising contenders — smaller at present but advancing rapidly and well-positioned to climb the ladder.

For example, Pune secured the top position in terms of size, measured by population and land area, yet it placed fifth in both growth and overall performance. North 24 Parganas ranked second in size among non-metros but stood at 115th in growth. Thane displayed a similar pattern, topping the size rankings but falling to 290th in growth. In contrast, Ahmedabad, ranked fourth in size, achieved the highest growth ranking among major cities. Among emerging urban centres, Muzaffarpur illustrated the “rising star” phenomenon, placing 45th in size but climbing to 24th in growth.

Together, these findings paint a picture of a country in transition. India’s urban narrative is no longer confined to a handful of mega-cities. Instead, a broader constellation of fast-growing centres — both established and emerging — is reshaping the economic landscape. As policy support strengthens and private investment follows, the country’s urban engine appears set to drive the next chapter of national growth.