India’s urban population makes up 31 per cent of the total, and is expected to rise to 590 million by 2030, which is an increase of more than 200 million over 2011. Urban India will also account for 70 per cent of the country’s economic activity and new jobs.

According to estimates, urban India would require Rs 39 lakh crore ($630 billion) over the next 20 years to achieve universal service delivery.

Jawaharlal Nehru National Urban Renewal Mission (JNNURM), was the first major scheme announced by the central government for improving urban life. Launched in 2006, it had an outlay of Rs 1 lakh crore ($16 billion) for the renewal of 65 cities in India.

JNNURM took the first steps towards development of urban infrastructure at a national scale. However, the shortcomings indicate (Box 1) that the central government failed to incentivise states and local bodies to build capacities.

Box 1 : Highlights of JNNURM from 2005-06 to 2011-12

-Mission was launched on 3rd December 2005 with objective of reforms-driven, fast track development in 65 mission cities

-Envisaged investment was estimated at Rs 1,00,000 crore for a seven-year period. Share of Central Government was committed at Rs 50,000 crore while states and local bodies were expected to contribute remaining Rs 50,000 crore

-Actual amount released as of 2011-12 stood at Rs 40,584 crore

-According to the Comptroller and Auditor General (CAG), all mandatory and optional reforms were not implemented as per commitments made. Also, institutional reforms intended to strengthen capacity within ULBs were not implemented by states

Completion rate and outcomes:

-Urban Infrastructure- 231 projects completed out of 1298 projects that were approved

-Housing- 22 projects completed out of 1517 projects approved

Source: Performance audit on JNNURM, Comptroller and Auditor General of India, 2012

The present government has given a boost to urban development with the announcement of the smart cities scheme and the urban renewal of infrastructure scheme

In its draft note on smart cities (Box 2), the Ministry of Urban Development has indicated an investment of Rs 50 crore ($8 million) for each smart city to build operational infrastructure within municipalities to catalyse further investment.

Box 2: Smart Cities Scheme, Ministry of Urban Development, 2014

-Draft note published by the Ministry of Urban Development on 3rd December, 2014 for developing 100 Smart Cities in India, as envisaged during Union Budget 2014-15

-Focus on building Institutional Infrastructure, Economic Infrastructure, Social Infrastructure and Physical Infrastructure

-Cities to meet nine specified benchmarks to qualify for Smart Cities grant

-Government of India to provide support through Viability Gap Funding (Partial Funding), Remaining investment requirement to be raised by States and Local Bodies through Private Sector Participation (PP), Market borrowing, Loans, and other alternate mechanisms

*The Ministry of Urban Development is yet to publish the detailed framework for Smart Cities Scheme.

The ministry is yet to release detailed guidelines on the operational framework for smart cities.

In Budget 2014-15, the central government allocated Rs 17,459 crore for the Ministry of Urban Development and Rs 6,008 crore for the Ministry of Housing and Urban Poverty Alleviation. In comparison to 2013-14, the amount allocated to both the ministries shows significant increase of 133% and 400%, respectively.

Table 1: Demand for Grants for Ministry of Urban Development; Rs Crores
ItemB.E 2014-15Where is it Spent?
Grants-in-aid to States and Union Territories7,170Rs 7,040 crore for smart cities;Rs 2,420 crore for metro;

Rs 1,497 crore on housing

Rs 570 crore for North east region and union territories

Rs 200 crore for heritage cities

Loans for Urban Development5,460
Urban Development3,133

Source:Table 4; Union Budget 2014-15, Ministry of Finance

Yet, as a percentage of spending for the year, urban development received less than 3% of central plan outlay.

The major allocations were routed through grants-in-aid to state governments (Table 1) or loans towards urban development. A significant portion of this, at Rs 7,040 crore, was allocated towards building 100 smart cities.

Of the remainder, Rs 2,420 crore was allocated for developing metro rail in Ahmedabad and Lucknow.

The finance minister also proposed extension of the pooled municipal debt obligation facility to Rs 50,000 crore whereby banks will be better placed to invest in urban infrastructure and local bodies.

With no vision document for smart cities or a clear agenda for urban development, it is unclear how the government has allocated the budgeted amount or how it utilised the debt obligation fund to promote civic infrastructure in urban areas.

As Finance Minister Arun Jaitley stands up to present what is widely expected to be a path-breaking budget on February 28th, we keenly look forward to the urban agenda occupying center stage.

  • Based on the results of JNNURM, how will the government ensure that smart cities reforms are implemented as per commitment?
  • How will Budget 2015-16 address the challenge of building capacity within local bodies?
  • What funding patterns and institutional reforms will be adopted to catalyse resource mobilisation through urban local bodies for infrastructure development?

(Anurag Gumber works as an advocacy associate with Janaagraha Centre for Citizenship and Democracy. Janaagraha is a Bangalore-based not-for-profit, focussed on transforming the quality of life in India’s cities and towns. Anurag can be contacted on


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