In the Union Budget 2026–27, Finance Minister **Nirmala Sitharaman unveiled an ambitious plan to transform urban development across India by allocating ₹5,000 crore per City Economic Region (CER) over five years. This initiative aims to shift the focus from congested metropolitan centres to emerging cities, Tier-II and Tier-III urban hubs, and even temple towns recognizing that cities are engines of growth, innovation and opportunity. This move comes as part of a broader infrastructure-led strategy to strengthen economic connectivity, improve quality of life, and boost local industry and tourism.
Author: Aashiya Jain | EQMint | Budget 2026
What Are City Economic Regions (CERs)?
City Economic Regions, or CERs, are geographic clusters built around a core city or group of cities and their surrounding towns, designed to function as integrated economic hubs. Instead of treating cities as isolated units, a CER approach looks at the entire urban ecosystem including transport, jobs, housing, education and health facilities as an interlinked entity. Under the 2026 Budget, the government plans to map these regions based on their specific growth drivers and tailor development strategies accordingly.
For example, a CER dominated by tourism might focus on heritage preservation and connectivity, while another centred on manufacturing could prioritise industrial infrastructure and workforce skills. The ₹5,000 crore allocation per CER spread over five years will help turn this vision into reality, backed by a reform-cum-result-based financing mechanism to ensure funds translate into tangible progress.
Why CERs Matter Now
India’s urban landscape has changed rapidly over the past decade. While megacities like Delhi, Mumbai and Bengaluru have long been focal points for development, smaller cities and regional hubs are increasingly contributing to national growth. These emerging urban centres are becoming hotspots for entrepreneurship, services, and local industry. However, many still struggle with inadequate infrastructure, limited public services, and weak connectivity.
The allocation of ₹5,000 crore per CER reflects a policy shift: the government now aims to broaden economic opportunities beyond traditional hotspots. This strategy not only supports economic decentralisation but also helps tackle regional imbalances by promoting equitable development across the urban spectrum.
CERs and Temple Towns: Beyond Economics
Interestingly, the 2026 Budget also emphasises CER development around temple towns, recognising cultural tourism as an economic driver. Enhanced infrastructure in such regions can help support tourism led growth, increasing revenue and employment opportunities for local communities. By integrating cultural value with economic strategy, CERs offer a holistic approach that goes beyond industrial or commercial metrics alone.
For instance, a CER centred on a historic religious town might prioritise better roads, hospitality infrastructure, waste management, and connectivity to nearby cities making it easier for visitors and encouraging local entrepreneurship. Such integration of culture and economy reflects India’s unique urban diversity.
Complementing Broader Urban Priorities in Budget 2026
The CER initiative is one of several urban-focused measures announced in Budget 2026. The government also committed to increasing capital expenditure to ₹12.2 lakh crore, underscoring its focus on infrastructure expansion and economic growth. Major announcements include seven high-speed rail corridors, expanded waterways, and urban transport enhancements all intended to boost connectivity and economic integration across regions.
Moreover, the Budget seeks to empower cities through reforms, professional capacity building, and innovative financing mechanisms such as challenge funds and municipal bonds each designed to support local governance and project execution. Together with CERs, these measures represent a multi pronged push to strengthen India’s cities from the inside out.
What It Means for the Future
The ₹5,000 crore per CER allocation is not just a funding announcement; it is a strategic signal. It acknowledges that India’s future growth will be powered not only by established megacities, but by a network of dynamic regional hubs. By investing in tailored infrastructure, connectivity, and local economic strengths, the government aims to foster urban ecosystems that can generate jobs, attract investment, and support inclusive development.
For residents of Tier-II and Tier-III cities, this could mean better roads, enhanced public services, more job opportunities, and a higher standard of living. For businesses, CERs offer new markets and smoother logistics. And for policymakers, it presents a framework to unlock the latent potential of cities across the nation bringing economic opportunity closer to where people live and work.
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