Evolution of Urban Policies in India: From Planning to Reforms

India’s urban policy has rarely stood still. From the refugee resettlement colonies of the 1950s to today’s reform-linked infrastructure missions, the way governments think about cities has shifted with the wider economy and political mood. The journey moves through three broad stages: an early period of state-led housing and master planning, a liberalisation phase that invited private players in, and a contemporary era built around infrastructure and governance reform. Tracing this arc shows not just how policies changed, but why each generation of planners believed it had found the answer to the urban question.

Early urban policies (1951-1984)
Housing and slum clearance in the first plans
Master plans and development authorities
From clearance to improvement
The economic liberalisation phase (1986-2000)
The National Housing Policy and the enabling state
Small town development through IDSMT
Poverty alleviation: NRY and SJSRY
Contemporary reforms (2001-present)
JNNURM: linking funds to reform
UIDSSMT and small and medium towns
Public-private partnerships and financial viability
What changed across the decades

Early urban policies (1951-1984)

The first decades after independence treated the city largely as a problem of shelter and order. Partition had pushed waves of refugees into Bombay, Calcutta and Delhi, and rapid industrialisation pulled rural migrants behind them. Policy responded by focusing on housing, clearing slums, and drawing up rigid blueprints for how cities should grow.

Housing and slum clearance in the first plans

The First Five Year Plan (1951-1956) formally acknowledged the urban housing shortage and channelled a large share of its outlay into the housing sector, supporting institution-building and basic infrastructure. Early schemes were aimed at specific groups: a subsidised housing scheme for industrial workers and economically weaker sections, and a low income housing scheme offering loans. The Second Five Year Plan saw the launch of a dedicated Slum Clearance and Improvement Scheme in 1956, which funded demolitions and the rehabilitation of displaced residents into government housing. The logic of the time was straightforward: slums were viewed as blight to be removed, not communities to be upgraded.

Institutions also took shape in this period. A statement on housing policy was made in Parliament in 1957, and the Delhi Development Authority was established under an Act of Parliament to implement the master plan for the capital. The government gradually shifted from giving direct loans to individuals towards assisting state governments and local authorities instead.

Master plans and development authorities

The Second Five Year Plan also introduced the concept of regional planning and put the master plan at the centre of urban governance. Much of this borrowed from British practice: most state legislation still traces back to the union government’s Model Town and Country Planning Law of 1960, which itself derives from the British Town and Country Planning Act of 1947. These laws set up a centralised, top-down system with limited room for local government or public participation.

To carry out these plans, states created powerful development authorities. The Third Five Year Plan focused on comprehensive development plans for major metropolitan centres and rapidly growing industrial towns, while planned cities like Chandigarh, Gandhinagar and Bhubaneswar became showcases of the modern, ordered city. The master plan defined land use decades in advance; the development authority worked out how to deliver it.

From clearance to improvement

By the early 1970s, the limits of bulldozing slums had become clear. Resettlement colonies were often on peripheral land that did not meet residents’ needs. The Environmental Improvement of Urban Slums scheme, introduced as a central scheme in 1972, marked a shift from removal towards improvement and upgradation. Rather than demolishing settlements, the state began financing water supply, drains, street lighting and community latrines within existing slums. Sites-and-services schemes followed a similar philosophy, providing serviced plots on which households could build their own homes step by step.

The economic liberalisation phase (1986-2000)

As India edged towards economic reform, urban policy changed character. The state stopped seeing itself as the sole provider of housing and started positioning itself as a facilitator that would enable markets, mobilise finance, and bring private players into the picture. Poverty alleviation and small town development became explicit goals alongside shelter.

The National Housing Policy and the enabling state

The institutional groundwork came first. The National Housing Bank was set up in 1986 to channel housing finance, after which insurance companies floated their own housing finance arms. Then came the country’s first National Housing Policy, drafted in 1988, later revised in 1994 and 1998. The policy aimed to eradicate homelessness, improve conditions for the inadequately housed, and provide a minimum level of basic services to all. Crucially, it reframed the state’s role: instead of building houses directly, government would assist by increasing the supply of residential land and finance, with particular attention to poorer sections. This “enabling” approach mirrored a global rethink promoted by international agencies at the time.

Small town development through IDSMT

Planners also recognised that runaway growth in the largest cities partly reflected the weakness of smaller towns. The Integrated Development of Small and Medium Towns programme, launched in 1979-81, tried to strengthen these settlements so they could absorb migration and serve as regional economic anchors. The idea was to disperse growth rather than let it pile up in the metros, easing pressure on the primate cities while building infrastructure where it was thinnest.

Poverty alleviation: NRY and SJSRY

The Seventh Plan recognised urban poverty explicitly for the first time and launched the Urban Basic Services for the Poor programme, which fostered community structures so the poor could participate in their own development. The Nehru Rozgar Yojana combined housing, employment, skills and financial assistance for self-employment, while the National Slum Development Programme tried to fuse shelter with poverty alleviation. The proliferation of overlapping schemes eventually prompted consolidation. In 1997, the Swarna Jayanti Shahari Rozgar Yojana subsumed earlier schemes like NRY, the Urban Basic Services for the Poor, and the Prime Minister’s Integrated Urban Poverty Eradication Programme into a single convergence-based programme. Despite good intentions, many of these efforts remained fragmented, administered by different ministries that did not coordinate well, which blunted their impact.

Contemporary reforms (2001-present)

The new century brought a more ambitious and explicitly reformist agenda. Cities were now seen as engines of economic growth whose crumbling infrastructure and weak governance were holding the country back. The defining feature of this era is conditionality: central money would flow, but only to cities that agreed to reform how they were run and financed.

JNNURM: linking funds to reform

The Jawaharlal Nehru National Urban Renewal Mission, launched in December 2005, was the flagship of this approach. It bundled together infrastructure investment in water supply, sewerage, drainage, solid waste management and urban transport with a mandatory reform package. Cities had to adopt e-governance, modern accounting practices, property tax improvements and citizen participation mechanisms to keep receiving funds. The reform conditions and fund releases were linked directly to one another, covering measures like rationalising tariffs, raising user charges and inviting private participation in service delivery. Parallel sub-missions, Basic Services to the Urban Poor and the Integrated Housing and Slum Development Programme, addressed shelter for the urban poor.

UIDSSMT and small and medium towns

The mission did not forget smaller settlements. The Urban Infrastructure Development Scheme for Small and Medium Towns was the JNNURM component for towns below the big-city threshold. According to the Town and Country Planning Organisation, which monitored the scheme, it aimed to improve infrastructure, create durable public assets, enhance public-private partnership and promote planned integrated development. Over the mission period more than a thousand projects were approved, with thousands of crores in central assistance released. The scheme used simpler procedures than the big-city programme, recognising that smaller towns often lack administrative capacity. When JNNURM wound down, ongoing UIDSSMT projects were absorbed into the Atal Mission for Rejuvenation and Urban Transformation in 2015.

Public-private partnerships and financial viability

A central thread running through these reforms is the push to make urban local bodies financially self-sustaining. Government communications were explicit that public-private partnerships could supplement public investment in urban infrastructure, and JNNURM actively encouraged cities to use the PPP route. The underlying belief was that throwing money at poorly governed cities would not produce lasting results. A study of the mission’s design noted that the infrastructure focus areas were tightly defined around water, sewerage, drainage, waste and transport. Critics argue this market-oriented model, with its emphasis on user charges and cost recovery, risked pricing out the poor who still lacked basic services. That tension, between financial viability and inclusive access, remains unresolved in current programmes.

What changed across the decades

Read together, the three phases tell a story of the state steadily redefining its own role. In the early period it was the builder and clearer, drawing master plans and erecting authorities to enforce them. In the liberalisation phase it became the enabler, mobilising finance and inviting markets in while consolidating scattered poverty schemes. In the contemporary phase it became the reformer and financier, releasing money only against governance change and leaning heavily on private partnership. The continuities matter too: slum surveys recommended in the First Plan echo in today’s data-driven targeting, and the master plan tradition still shapes how cities are zoned. Each era inherited the unfinished business of the last.

What do you think? Has the shift from a state that builds houses to a state that enables markets actually delivered better outcomes for the urban poor, or simply changed who is responsible when services fail? And if reform-linked funding rewards cities that already have strong administrative capacity, how should policy support the towns that need help the most?

References

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Evolution of Urban Policies in India: From Planning to Reforms

Table of Contents

Early urban policies (1951-1984) 🔗

Housing and slum clearance in the first plans 🔗

Master plans and development authorities 🔗

From clearance to improvement 🔗

The economic liberalisation phase (1986-2000) 🔗

The National Housing Policy and the enabling state 🔗

Small town development through IDSMT 🔗

Poverty alleviation: NRY and SJSRY 🔗

Contemporary reforms (2001-present) 🔗

JNNURM: linking funds to reform 🔗

UIDSSMT and small and medium towns 🔗

Public-private partnerships and financial viability 🔗

What changed across the decades 🔗