Clipped from: https://www.thehindubusinessline.com/opinion/indias-growth-moment-is-turning-regional/article70601131.ece
The Budget’s thrust on rail corridors, logistics, and using tier 2,3 cities as hubs of investments and jobs marks a shift
Logistics: Aiding regional growth | Photo Credit: ipopba
Union Budgets are often judged by headline numbers or marquee schemes. Yet some of the most consequential shifts reveal themselves quietly — in how problems are framed, in the language policymakers choose, and in the logic that underpins public investment. Seen through this lens, the Union Budget 2026–27 marks an inflection point. Its significance lies not in a single announcement, but in a clear reorientation of India’s growth strategy: away from an overdependence on a few metropolitan centres, and towards a more regionally grounded economic architecture.
For much of the past three decades, India’s growth narrative has been shaped by its largest cities. Metros became the primary sites of capital inflows, job creation, innovation and infrastructure spending. The implicit assumption was that growth generated in these hubs would naturally diffuse outward, lifting surrounding regions through spillovers. While this model delivered scale and visibility, it also produced structural imbalances — persistent disparities, overstretched urban systems, and large parts of the country remaining only weakly integrated into growth dynamics.
The 2026 Budget signals a growing recognition of these limits. Rather than treating spatial inequality as a residual outcome, it begins to engage with geography as a core design principle. Public investment, infrastructure planning and industrial incentives are increasingly being deployed through a differentiated regional lens, acknowledging that economic transformation unfolds unevenly across places — and that policy must respond accordingly.
Connectivity as an economic integrator
A central pillar of this shift is connectivity — not merely as physical infrastructure, but as a mechanism for economic integration across regions. The proposed expansion of high-speed rail corridors linking major urban and emerging centres reflects this thinking. These corridors are being positioned as growth connectors, reducing travel time, widening labour catchments, and enabling firms to operate across multi-city regions rather than within isolated urban pockets.
Equally important is the renewed focus on freight, logistics and multimodal transport. Dedicated freight corridors, inland waterways and logistics networks are intended to reduce the cost and friction of moving goods across regions — a long-standing constraint for manufacturing clusters and MSMEs located outside major metros. Lower logistics costs are not just an efficiency gain; they determine whether smaller cities and districts can participate meaningfully in national and global value chains.
Anchoring regions through specialised capabilities
Connectivity alone, however, does not generate durable growth. Regions require economic anchors that draw on local capabilities and comparative advantages. The Budget’s sectoral thrust reflects an attempt to do precisely this. Initiatives spanning electronics, semiconductors, critical minerals and advanced manufacturing point to a strategy where regions are defined by specialised assets rather than generic policy incentives.
The proposed City Economic Regions (CERs), supported through challenge-mode funding, further reinforce this approach. By allowing regions to articulate their own priorities and compete for resources, the policy moves away from uniform templates towards place-based economic strategy. The underlying message is clear: competitive regions are built by aligning infrastructure, industry, skills and institutions around locally grounded growth pathways.
Rethinking the role of smaller cities
One of the most consequential aspects of the Budget is its treatment of tier-2 and tier-3 cities. These are no longer framed merely as spillover destinations for metro congestion or consumption markets in waiting. Instead, they are being positioned as active nodes in production networks — places where firms can locate, workers can find opportunity, and supply chains can deepen.
This has far-reaching implications for employment, migration and urban sustainability. When smaller cities function as economic anchors in their own right, they absorb labour closer to where people live, ease pressure on megacities, and create more balanced urban–rural systems. In a country with India’s demographic scale and internal mobility, this spatial rebalancing is not just desirable — it is essential.
From assets to ecosystems
Roads, rail and industrial parks matter, but without productive firms, skilled workers, finance and institutional capacity, such assets remain underutilised. The emphasis on MSMEs, productivity enhancement and enterprise financing reflects an understanding that growth depends on ecosystems, not isolated investments.
Measures such as the SME Growth Fund and expanded support for micro enterprises signal an effort to link physical infrastructure with firm-level capabilities and job creation. Yet ecosystem building also requires tougher, often overlooked elements. Crucially, this is not just about dispersing growth geographically. It is about building regional capability — the institutional capacity, data depth, and coordination mechanisms required to translate local potential into scalable economic outcomes. Budgets can signal intent, but execution will require strategies that reflect their unique industrial mix, workforce profile, and market access.
A shift in development thinking
India appears to be moving from an aggregate view of growth — measured largely through national averages — towards a more differentiated economic strategy that takes regions seriously as units of development. This transition will not be automatic. It calls for sharper regional diagnostics, stronger collaboration between government, industry, finance, and institutions, and a willingness to move beyond one-size-fits-all policy design and active investments by the private sector. It also demands patience: regional economic transformation is cumulative, not instant.
As India’s growth discourse moves beyond headline GDP numbers to questions of place, scale and resilience, the 2026 Budget deserves attention for what it signals. It suggests India’s next growth phase will be shaped by how effectively regional economies are identified, connected, and scaled – across multiple geographies, sectors, and city sizes – each rooted in its own strengths, yet linked into a shared national trajectory.
The writer is Founder and CEO, Dorian Scale, Visiting Professor, XLRI, and former Director Tata Trusts
Published on February 7, 2026
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