India, Sept. 17 -- Prime Minister Narendra Modi, at a Niti Aayog governing council meeting, urged state governments to focus on tier-2 and 3 cities as engines of sustainability and growth. He spoke of the Urban Challenge Fund (UCF) that will provide seed money. Are the small- and medium-sized cities in India ready to embrace such transformation? How can we spur, institutionalise and sustain growth in our tier-2 and 3 cities? Here, we suggest some orientations for policy, toward achieving such a goal.

The UCF, introduced in the FY26 budget, allocates Rs.1 lakh crore over five years, with Rs.10,000 crore set aside for the current fiscal, to fund projects in three priority areas: Cities as growth hubs, creative redevelopment, water and sani...