Urban Reform Initiatives in India: Strategies for Inclusive Growth

India’s cities generate a large share of national income, yet for decades their roads, water systems, and municipal finances struggled to keep pace with rapid population growth. The response to this challenge took shape through a series of structured reform programmes, the most ambitious of which reshaped how urban areas are planned, financed, and governed. Understanding these reform initiatives is essential for anyone studying how cities transition from crisis management to planned, inclusive development.

The evolution of urban reform efforts
The launch of JNNURM in 2005
The core framework of JNNURM
City Development Plans as the starting point
Two sub-missions covering different needs
Funding shared across three levels
Public-private partnerships in implementation
How PPPs were structured
Leveraging additional funds
Mandatory and optional reforms
Mandatory reforms
Optional reforms
Lessons from the reform experience

The evolution of urban reform efforts

Urban reform did not begin with a single flagship scheme. The groundwork was laid through earlier planning cycles, including the Eighth Five Year Plan period in the early 1990s, when the limitations of centralised, state-controlled municipal administration became increasingly visible. A defining moment arrived with the 74th Constitutional Amendment Act of 1992, which sought to convert urban local bodies (ULBs) into genuine self-governing institutions and establish them as the third tier of government.

However, the Amendment was only a beginning. Many states retained control over functions, funds, and functionaries, and key bodies like District Planning Committees and Metropolitan Planning Committees were not formed in most states. Early reform efforts addressed basic infrastructure gaps and municipal governance, but they often lacked coordinated strategy and adequate funding for meaningful change.

The launch of JNNURM in 2005

The turning point came with the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), launched on 3 December 2005 by then Prime Minister Manmohan Singh. It became the largest national urban initiative to encourage reforms and fast-track planned development in 63 identified cities, a number that grew over time. These cities were chosen deliberately, including metros with over four million people, cities between one and four million, and selected state capitals along with locations of religious, historic, or tourist importance.

What made JNNURM distinctive was its focus on governance alongside infrastructure. According to a Ministry of Urban Development assessment, only around 70% of cities had piped water supply and 63% had sewerage facilities at the time, while solid waste treatment lagged far behind. The Mission recognised that building physical assets was pointless without the institutional capacity to operate and maintain them. It therefore introduced reform-linked funding, where access to central money depended on cities and states committing to specified governance and sector reforms.

The core framework of JNNURM

The Mission rested on three interlocking elements: City Development Plans, sectoral projects, and a shared funding mechanism connecting the Centre, states, and ULBs. Together these created a structured pathway from planning to execution.

City Development Plans as the starting point

Before any money was released, the urban local body was required to prepare a City Development Plan (CDP) and identify a specific infrastructure project for funding. The CDP was meant to be a strategic document outlining a city’s long-term vision across sectors, supported by related plans such as city mobility plans and city sanitation plans. The state government would approve both the CDP and the chosen project before it moved forward.

Two sub-missions covering different needs

JNNURM operated through two sub-missions. The first, Urban Infrastructure and Governance (UIG), funded projects in water supply, sanitation, sewerage, urban transport, and roads. The second, Basic Services to the Urban Poor (BSUP), focused on housing, civic amenities, and integrated slum development for low-income residents. This dual structure reflected an attempt to balance economic infrastructure with social inclusion, ensuring that growth did not bypass the urban poor.

Funding shared across three levels

The financing model was a partnership. The Government of India committed a substantial share of a total investment pool exceeding one trillion rupees, with the remainder contributed by state governments and ULBs depending on the city’s size and category. Smaller and less developed cities received a higher proportion of central grants, while larger metros were expected to mobilise more of their own resources. Funds flowed to ULBs through State Level Nodal Agencies, while a Central Sanctioning and Monitoring Committee and a Technical Advisory Group appraised projects at the central level.

Public-private partnerships in implementation

Government grants alone could not meet the scale of investment that cities required. To bridge this gap, JNNURM actively encouraged public-private partnerships (PPPs). A PPP project is essentially a contract or concession between a government or statutory entity and a private company to deliver an infrastructure service, often in return for user charges.

How PPPs were structured

Under these arrangements, the public sector typically acted as facilitator, enabler, and supervisor, while the private partner brought management skills, technology, operational efficiency, and additional capital. Several cities used PPP models for water supply, bus rapid transit, and solid waste management. For instance, water supply PPP projects were sanctioned in cities ranging from Nagpur to Mysore, and bus rapid transit projects were implemented under PPP mode in places like Ahmedabad, Surat, and Rajkot.

Leveraging additional funds

The value of PPPs lay in leveraging resources. By combining JNNURM grants with private investment, cities could improve the financial viability of projects and reduce their cost of capital. In a typical arrangement, a portion of the project might be funded through grant-in-aid while the private operator contributed the balance and handled operation and maintenance for a fixed period. In the proposed second phase of the Mission, the Centre planned to extend viability gap funding to private partners to push more projects into PPP mode.

Mandatory and optional reforms

The heart of JNNURM was its reform agenda. Funding was conditional, meaning cities and states had to commit to a defined set of reforms to unlock and continue receiving assistance. These reforms were divided into mandatory and optional categories, applied at both the state and ULB levels.

Mandatory reforms

Mandatory reforms were non-negotiable commitments. At the state level, these included full implementation of the 74th Constitutional Amendment Act in letter and spirit, transferring the functions listed in the Twelfth Schedule to ULBs, and repealing the Urban Land Ceiling and Regulation Act to free up land markets. States were also expected to constitute District Planning Committees and Metropolitan Planning Committees, and to ensure that ULBs could actually perform the city planning function with adequate staff and funds.

At the ULB level, mandatory reforms centred on financial and administrative modernisation. Cities had to adopt an accrual-based double-entry accounting system, introduce e-governance, and undertake property tax reforms with a target of raising collection efficiency to at least 85%. The aim was to make municipalities financially stronger, more transparent, and more accountable to citizens. Public participation in decision-making was also a required institutional reform, although in practice many cities struggled to involve residents meaningfully.

Optional reforms

Optional reforms gave cities flexibility to deepen administrative and structural change at their own pace. These included measures such as administrative streamlining, introduction of property title certification systems, revision of building bye-laws, encouragement of rainwater harvesting, recycling of wastewater, and earmarking funds for services to the urban poor. While not compulsory, these reforms signalled a city’s commitment to going beyond minimum requirements and were intended to build long-term institutional resilience.

Lessons from the reform experience

The reform programme produced mixed results. On one hand, JNNURM breathed life into the long-dormant 74th Amendment and pushed cities toward modern accounting, e-governance, and project-based planning. On the other hand, evaluations found that the lack of capacity at the local government level was a major constraint in planning and implementing projects. Many states continued to dominate ULBs, parastatal agencies retained control over services like water supply, and property tax collection remained weak in several cities.

These experiences shaped later programmes. The Mission ran from 2005 and was extended until 2014, after which initiatives like the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and the Smart Cities Mission carried the reform agenda forward, often retaining the principle of linking incentives to reforms. The unfinished agenda of genuine decentralisation, where ULBs control planning, finances, and personnel, remains a central concern in contemporary urban policy.

What do you think? Given that reform-linked funding pushed cities toward better governance but also exposed weak local capacity, should future programmes prioritise building municipal capacity first before tying grants to reforms? And do you think public-private partnerships strengthen inclusive urban growth, or do they risk shifting the cost of essential services onto the citizens least able to pay?

References

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Urban Reform Initiatives in India: Strategies for Inclusive Growth

Table of Contents

The evolution of urban reform efforts 🔗

The launch of JNNURM in 2005 🔗

The core framework of JNNURM 🔗

City Development Plans as the starting point 🔗

Two sub-missions covering different needs 🔗

Funding shared across three levels 🔗

Public-private partnerships in implementation 🔗

How PPPs were structured 🔗

Leveraging additional funds 🔗

Mandatory and optional reforms 🔗

Mandatory reforms 🔗

Optional reforms 🔗

Lessons from the reform experience 🔗