India’s mega-cities may be engines of growth for the nation’s economy but by another measure they are far from being truly prosperous, according to a report released on Wednesday by United Nations Habitat, State of the World’s Cities 2012/2013.

In terms of productivity, infrastructure, quality of life, equity and environmental sustainability, Mumbai and Delhi lag behind global counterparts, the report said, including even relatively obscure cities like Tegucigalapa in Honduras and Yerevan in Armenia.

“Conceptually, the notion of prosperity still belongs within the realm of economic growth, but it has to do with more than just economic well-being and material progress," said the report, which has tried to add nuance to standard gross development product (GDP) measures by including new metrics to provide a more robust notion of urban development.

The resulting City Prosperity Index uses the aforementioned five parameters to rank 95 cities into six groups on their path to prosperity. Topping the list are Vienna, New York, Toronto and London in group one, which includes cities with “very solid prosperity factors".

The two Indian cities that feature on the index, Mumbai and New Delhi, fall into group four (cities with moderate prosperity factors). Group four cities, the report said, tend to have institutional and structural failures, feature less balanced development and show a “neat divide" between rich and poor.

In the last decade, urban populations in the developing world grew by an average 1.2 million people a week. More than half of the world’s population is now urban and in 2010, a McKinsey Global Institute report estimated that by 2030, 590 million Indians would live in cities—nearly twice the population of the US today.

Eduardo Lopez Moreno, chief author of the UN Habitat report, said that although cities have been the crucible of the global financial crisis, they also offer the solution. “In the last few years, we have seen a financial crisis that has impacted cities, but it’s not the crisis that has affected prosperity but the narrow notion of prosperity that’s affecting the solution."

India is no exception, Moreno said, adding the country is witnessing “unsustainable growth" that pushes development to the peripheries, and a growing inequality between the rich and the poor.

Comparing Mumbai with Delhi, respectively, at numbers 52 and 58 on the full list of 95 cities (for now only a partial list of 69 is available, on which their rankings are 46 and 52, respectively), Lopez Moreno said, “Delhi is seriously falling behind on its environment index (0.448 to Mumbai’s 0.632)." It also lags on productivity (0.596 to Mumbai’s 0.645) but wins in terms of infrastructure (0.786 to Mumbai’s 0.745).

A.K. Mishra, secretary in the ministry of housing and urban poverty alleviation, said the Indian government needs to take a more holistic view of the problem, rather than creating schemes that only tackle one aspect of city development.

“Unless we integrate infrastructure development prosperity with concepts like equality and quality of life then the city is not liveable," he said. “In India, we know where we stand. Most investment in urban areas goes to the rich; the poor are left out."

In order to select its five parameters, the report surveyed city dwellers across the globe about issues that most hampered their economic productivity. In Asia, almost a quarter of the respondents identified corruption as the biggest hurdle, while around 20% picked deficient infrastructure.

Amitabh Kundu, dean of the School of Social Sciences at Jawaharlal Nehru University, noted the disconnect between development policies aimed at large cities and India’s small and medium-sized towns. “The small and medium towns are not getting an opportunity to get connected to the global capital market," he said, adding that cities with the lowest prosperity ratings report the highest gap between large city human development indicators and national ratings.

Another issue that affects the growth of Indian cities—land use in urban planning—was identified as crucial to expanding prosperity. “In many cities, urban planning has been instrumentalized by the real estate business," the report noted. “Cities that respond to the interests of the better-off... tend to create enclaves of prosperity for a select few." In Bangalore, the report quotes an expert saying: “The poor have survived despite master planning."

If Indian cities are to achieve real prosperity, Lopez Moreno says, they will need new planning methods that focus on inclusive growth.