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The Union Budget allocated Rs 96,777 crore for urban development.

Union Budget for urban development in 2025-26

The Union Budget 2025-26 has allocated ₹96,777 crore for urban development, marking an 18% increase from the previous year. However, factoring in inflation, the real allocation has effectively declined.

Capital-intensive projects over other urban needs

The Budget heavily prioritizes capital-intensive metro rail projects, raising their allocation by 46% to ₹31,239 crore for 2025-26.

Allocations for employment-focused or sustainability-driven initiatives like the Smart Cities Mission and AMRUT remain stagnant or reduced. For example, the combined outlay for AMRUT and Smart Cities Mission dropped from ₹10,400 crore to negligible levels, reflecting an uneven focus.

Funds for Urban Local Bodies (ULBs)

Direct transfers to ULBs fell slightly from ₹26,653 crore (2024-25) to ₹26,158 crore (2025-26).

Cities face pressure to raise their own revenues due to reduced central support post-GST implementation, which eroded ULB revenues by 21%. This forces cities to levy higher taxes on citizens to bridge funding gaps.

Housing and sanitation in cities

• PMAY(U): The urban housing scheme saw a 30% reduction in allocation (₹30,170 crore to ₹13,670 crore in RE), signaling slow implementation.
• Swachh Bharat Mission (Urban): Budget made ₹5,000 crore allocation, however concerns were raised as only 43% of the fund was utilized in 2024-25.

New Urban Challenge Fund   

The government introduced a ₹1 lakh crore Urban Challenge Fund, with an initial allocation of ₹10,000 crore for 2025-26.

It aims to finance urban redevelopment, water, and sanitation projects. However, the plan relies on 50% private-sector contributions—a risky bet given poor private investment in past urban schemes like Smart Cities.

PM SVANidhi scheme

The Budget revamped the PM SVANidhi scheme for street vendors:

• Increased loan limits and introduced UPI-linked credit cards (₹30,000 limit).
• Focused on skill development and capacity building.
• However, broader urban employment programs remain absent.

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Source: 

THE HINDU