Ongoing Urban Development Programs in India: A Comprehensive Guide

India’s cities generate a large share of the country’s economic output, yet for decades many of them ran on infrastructure that could not keep pace with the people moving into them. To fix this, the central government tied money to reform: cities and states would receive funds only if they agreed to modernise how they were governed and financed. This approach shaped the most important urban programmes of the last two decades, beginning with the Jawaharlal Nehru National Urban Renewal Mission. Understanding these programmes is essential to understanding how urban development policy actually works on the ground.

Why a reform-linked urban mission became necessary 🔗

By the 2001 Census, around 286 million people, or roughly 28% of the population, were living in urban areas. This rapid concentration in cities created severe pressure on water supply, sewerage, drainage, roads and housing. The population shift to cities led to infrastructure problems, deteriorating living conditions and rising urban poverty. Municipal bodies were often financially weak and poorly equipped to deliver services.

The government’s answer was to stop treating urban funding as a simple grant. Instead, money would be released in exchange for measurable governance and financial reforms. This is the central idea behind the programmes discussed below: investment and reform travelling together.

JNNURM and UIDSSMT: the twin engines of reform-linked funding 🔗

The Jawaharlal Nehru National Urban Renewal Mission, commonly known as JNNURM, was launched on 3 December 2005 by then Prime Minister Manmohan Singh. Its stated aim was to encourage reforms and fast-track the planned development of identified cities, focusing on efficient urban infrastructure, service delivery, community participation and the accountability of urban local bodies (ULBs).

How JNNURM was structured 🔗

JNNURM was not a single scheme but an umbrella with distinct components. The mission ran through two sub-missions for large cities. The mission comprised the Urban Infrastructure and Governance (UIG) sub-mission and the Basic Services for the Urban Poor (BSUP) sub-mission. UIG financed major infrastructure such as water supply, sewerage, drainage, solid waste management, roads and urban transport, while BSUP focused on housing and basic services for poor residents. These components targeted 65 selected mission cities.

The funding pattern that drove behaviour 🔗

Funding flowed in a deliberately structured way. Funds from the central and state governments flowed to a designated State Level Nodal Agency (SLNA) as grants-in-aid, which then disbursed them to the ULB or parastatal agency. The size of the central grant depended on the city: the central share ranged from about 35% in the largest cities up to 90% in cities in the North-Eastern states, with most cities receiving 50% or 80% depending on their population.

Crucially, money came in instalments tied to performance. The central assistance was predicated on states and ULBs signing a tripartite Memorandum of Agreement (MoA) committing them to specific reform milestones. Releases were linked to utilisation certificates and to progress on the agreed mandatory and optional reforms, which gave the reform agenda real teeth.

UIDSSMT: bringing small and medium towns into the fold 🔗

While the headline sub-missions served big cities, the Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT) covered everywhere else. Launched alongside JNNURM, it subsumed two earlier schemes, the Integrated Development of Small and Medium Towns (IDSMT) and the Accelerated Urban Water Supply Programme (AUWSP). Its goals were to improve infrastructure, create durable public assets, promote planned development and, importantly, to encourage public-private partnership in infrastructure.

The funding pattern for UIDSSMT differed from the big-city components. The scheme was funded on an 80:10 basis between the central and state governments, with the remaining 10% expected to be raised by the nodal or implementing agency from financial institutions or internal resources. For towns in the North-Eastern states and Jammu & Kashmir, the central-to-state ratio rose to 90:10. Funds were released in two tranches: half on signing the MoA, and the balance once utilisation certificates accounted for 70% of the earlier grants.

Major reforms and public-private partnerships 🔗

The reforms were the heart of the mission. They were divided into mandatory and optional categories, applied at both the state and the ULB or parastatal level.

Mandatory reforms 🔗

There were two sets of mandatory reforms: core reforms at the ULB or parastatal level aimed at process re-engineering through technology, and framework reforms at the state level. At the local level these included shifting to a modern accrual-based double-entry accounting system, introducing e-governance, reforming property tax to widen coverage and improve collection, and levying user charges so that cities could recover at least 50% of operation and maintenance costs initially, graduating to full cost recovery over time.

State-level reforms were structural. They included implementing the 74th Constitutional Amendment to devolve functions to ULBs, repealing the Urban Land Ceiling and Regulation Act, reforming rent control to encourage rental housing, and rationalising stamp duty. These reforms were designed to make municipal bodies financially sound and self-sustaining rather than permanently dependent on grants.

Optional reforms 🔗

Beyond the compulsory list, cities chose from a menu of optional reforms. These covered areas such as introducing property title certification, simplifying building approval processes, encouraging public-private partnerships, earmarking developed land for the poor and introducing computerised registration of land and property. Cities typically had to commit to a set number of these over the mission period, giving local governments some flexibility while still pushing change.

Public-private partnerships as a mode of development 🔗

A recurring theme across these reforms was the public-private partnership (PPP). The mission explicitly aimed to set the stage for private participation. The mission supported public-private partnerships and cost recovery to make service providers financially self-sustaining. The logic was straightforward: government grants alone could never meet the full scale of urban investment needed, so reform was meant to make cities creditworthy enough to attract private capital and institutional finance.

PPPs in urban India have since taken several forms, from concessions for solid waste management and water treatment plants to build-operate-transfer arrangements for transport facilities and parking. They allow cities to share project risk, bring in technical expertise and spread costs over the life of an asset rather than paying everything upfront.

Impact and future outlook 🔗

Two decades on, the verdict on these programmes is mixed but instructive. They reshaped how urban development is financed and governed, even where physical delivery fell short of targets.

What the programmes achieved 🔗

UIDSSMT alone left a substantial footprint. Across its main and transition phases, 1,036 projects were approved with total additional central assistance of around ₹14,171 crore released, and 466 projects were physically completed, including 297 water supply schemes. JNNURM as a whole pushed thousands of municipalities to adopt accrual accounting, e-governance and property tax reform for the first time. It also normalised the idea that funding should be conditional on governance improvements, an approach every later mission has retained.

The gaps that remained 🔗

The programmes also exposed real weaknesses. Many projects suffered significant time and cost overruns. Reform implementation was uneven, with several states completing the easy reforms while stalling on politically difficult ones such as full cost recovery and land law changes. A common criticism was that JNNURM carried a big-city bias, concentrating resources on a limited number of mission cities while leaving smaller towns relatively underserved. Weak technical capacity in municipalities slowed both project execution and reform follow-through.

From JNNURM to AMRUT and the Smart Cities Mission 🔗

These programmes are best understood as foundations rather than endpoints. JNNURM, including its UIDSSMT and UIG components, ran until 31 March 2014 after an extension, and ongoing projects that had crossed key thresholds were approved for funding under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT). The genuinely ongoing programmes today are AMRUT, now in its AMRUT 2.0 phase, the Smart Cities Mission and PMAY-Urban, all launched in 2015.

These successors carried forward the reform-and-PPP logic while widening the net. AMRUT has been described as the new avatar of JNNURM, casting its net wider to reach more urban centres rather than only the largest cities. AMRUT’s reform agenda continues to emphasise e-governance, energy and water audits, credit rating of ULBs and raising money through municipal bonds. The reliance on PPPs has, if anything, deepened: by the ninth anniversary of these missions, 51 cities had developed 200 projects through public-private partnership.

Recommendations for the road ahead 🔗

Three priorities emerge from this experience. First, capacity building must be treated as seriously as construction, because reforms fail when municipalities lack the staff and systems to sustain them. Second, cities need to move decisively toward financial self-reliance through credit ratings, municipal bonds and value-capture financing so that grants act as a catalyst rather than a crutch. Third, PPP frameworks need stronger contract design and risk-sharing so that private participation delivers reliable services without burdening users unfairly. The shift from reform-linked grants to genuinely creditworthy, self-financing cities remains the unfinished agenda these programmes began.

What do you think? Has tying funding to mandatory reforms genuinely strengthened urban governance, or has it mainly rewarded states that were already capable of reforming? And as cities lean more heavily on public-private partnerships, how should they balance attracting private capital against keeping essential services affordable for residents?

References

1. https://www.impriindia.com/insights/jawaharlal-nehru-national-urban-missio/
2. https://www.theigc.org/sites/default/files/2013/02/Wankhade-2013-Working-Paper.pdf
3. https://mohua.gov.in/upload/uploadfiles/files/1Mission%20Overview%20English(1).pdf
4. https://internationaljournalofresearch.com/2015/06/27/urban-infrastructure-development-scheme-for-small-medium-towns-uidssmt/
5. https://www.india.gov.in/urban-infrastructure-development-scheme-small-and-medium-towns
6. https://ulbharyana.gov.in/Website/DirectorateofUrbanLocalBodies/Images/d9ec2b01-6b7d-4729-b617-07d492769b52.pdf
7. https://en.wikipedia.org/wiki/Jawaharlal_Nehru_National_Urban_Renewal_Mission
8. http://tcpo.gov.in/uidssmt
9. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1910166&reg=3&lang=2
10. https://oidaijsd.com/wp-content/uploads/2019/03/11-10-05.pdf
11. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2028584