Budget 2026 targets tier II, III cities and temple towns as growth engines

The government will now focus on tier II and tier III cities, including temple towns, to strengthen modern infrastructure and basic amenities, Finance Minister Nirmala Sitharaman said on Sunday while presenting the Union Budget 2026–27.

Describing cities as India’s “engines of growth, innovation, and opportunities”, Sitharaman said the Budget aims to further amplify the role of cities in driving economic activity.

“Cities are India’s engines of growth, innovation, and opportunities. We shall now focus on tier II and tier III cities, and even temple towns, which need modern infrastructure and basic amenities,” she said in her Budget speech.

The Finance Minister said the government plans to map city economic regions (CER) based on their specific growth drivers to unlock the economic power of agglomerations.

“This Budget aims to further amplify the potential of cities to deliver the economic power of agglomerations by mapping city economic regions (CER), based on their specific growth drivers,” she said.

To support this initiative, Sitharaman announced a financial allocation for implementing CER plans. “An allocation of Rs 5000 crore per CER over five years is proposed for implementing their plans through a challenge mode with a reform-cum-results based financing mechanism,” she said.

During her speech, the Finance Minister also made announcements across several sectors, including agriculture, finance, health, employment, industry and tourism.

India’s key temple towns include Varanasi, Ayodhya and Mathura in Uttar Pradesh; Somnath and Dwarka in Gujarat; Gaya and Bodh Gaya in Bihar; and Madurai and Rameswaram in Tamil Nadu, among others.