BUDGET FUND FOR URBAN DEVELOPMENT: ECONOMY

BUDGET FUND FOR URBAN DEVELOPMENT: ECONOMY

NEWS: How has the Budget allocated funds for urban development?

 

WHAT’S IN THE NEWS?

The urban development budget for FY 2025-26 has increased to ₹96,777 crore but faces real decline when adjusted for inflation, underutilization, and major funding cuts in key schemes like PMAY(U). The emphasis on capital-intensive projects like metro expansion over employment generation and sustainable urban growth raises concerns about inclusivity and social equity.

 

Urban Development Budget 2025-26

1. Budget Allocation & Underutilization

  • Total Allocation: ₹96,777 crore (up from ₹82,576.57 crore last year).
  • Inflation-Adjusted Decline: Despite the increase, real allocation shows a decline due to inflation.
  • Underutilization of Funds:

Revised Estimate (RE) for FY 2024-25: ₹63,669.93 crore spent (22.9% lower than allocated).

 

2. Major Funding Cuts – Pradhan Mantri Awas Yojana (Urban) (PMAY-U)

  • PMAY(U) Allocation Cut:
  • Previous year: ₹30,170.61 crore
  • Current year: ₹13,670 crore (a significant reduction).
  • Indicates Implementation Gaps:
  • Housing shortage may worsen.
  • Delays in achieving “Housing for All” goals.

 

3. Focus on Capital-Intensive Projects – Metro Expansion Over Holistic Urban Growth

  • Increased Funding for Metro Projects:
  • 46% increase in allocation (from ₹21,335.98 crore to ₹31,239.28 crore).
  • Concerns Over Prioritization:
  • Metro expansion over other urban transport solutions raises questions about affordability and accessibility.
  • Lack of last-mile connectivity affects urban mobility.

 

4. Decline in Transfers to Urban Local Bodies (ULBs)

  • Direct Transfers Reduced:
  • Previous year: ₹26,653 crore
  • Current year: ₹26,158 crore
  • Revenue Loss Impact:
  • Abolition of octroi & GST introduction have reduced municipal revenues.
  • ULBs are forced to raise funds through additional taxes, affecting urban services.

 

5. Cuts in Centrally Sponsored Schemes (CSS) & Central Sector Schemes

A. Centrally Sponsored Schemes (CSS) – Reduced Funding

  • PMAY(U) (CSS Component): 30% cut in funding.
  • Swachh Bharat Mission (Urban):
  • Allocated: ₹5,000 crore
  • Spent: Only ₹2,159 crore (56% shortfall)
  • Other CSS programs affected:
  • Atal Mission for Rejuvenation and Urban Transformation (AMRUT).
  • Smart Cities Mission.

B. Central Sector Schemes – Focus on Infrastructure

  • Controlled by Union Government with a focus on metro rail & big infrastructure projects.

 

6. New Urban Challenge Fund & Private Sector Role

  • Urban Challenge Fund: ₹10,000 crore introduced for urban redevelopment.
  • ₹1 lakh crore redevelopment target (50% funding expected from private sector).
  • Concerns:
  • Private sector participation in Smart Cities Mission was negligible, raising doubts about feasibility.

 

7. Concerns & Implications

Lack of Focus on Employment & Sustainable Development

  • The budget prioritizes metro expansion but neglects employment generation and green jobs.

Social & Economic Equity Risks

  • Cuts in housing and urban schemes could increase urban inequalities.

Challenges for Urban Local Bodies (ULBs)

  • Reduced financial support limits their ability to develop local infrastructure and services.

Feasibility of Private Sector Involvement

  • Given past failures, expecting 50% private funding for urban redevelopment seems unrealistic.

 

Source: https://www.thehindu.com/news/national/how-has-the-budget-allocated-funds-for-urban-development-explained/article69200386.ece