The Government of India and the Asian Development Bank (ADB) on 17^th December 2021 signed a $350 million policy-based loan to improve access to urban services in India by accelerating policy actions and reforms to enhance service delivery and promote performance-based central fiscal transfers to urban local bodies (ULBs).

Rajat Kumar Mishra, Additional Secretary, Department of Economic Affairs signed for Government of India, the loan agreement for the first subprogram of $350 million under Sustainable Urban Development and Service Delivery Program while Takeo Konishi, Country Director of ADB’s India Resident Mission, signed for ADB. The first subprogram will establish essential policies and guidelines for urban reforms at the national level followed by specific reform actions and program proposals at the state and ULB-level under second subprogram.

After signing the loan agreement, Mr Mishra stated that the program is aligned with the Government of India’s national flagship programs that promote cities as engines of economic growth by improving the quality of urban life through the creation of high-quality urban infrastructure, assured service provisions, and efficient governance.

“The program builds upon ADB’s long engagement with India in the urban sector with continued support to the central and state governments to undertake reforms to ensure universal and improved access to basic urban services such as water supply, sanitation, and affordable rental housing, especially for the poor most affected by the COVID-19 pandemic,” said Mr. Konishi.

These outcomes will be achieved with support to India’s recently launched national flagship missions, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) 2.0 that envisages accelerated universal access of piped water supply and sanitation, and the Pradhan Mantri Awas Yojana that aims to provide affordable housing to all, including poor, urban migrant and industrial workers. The program will also promote performance-based central fiscal transfers to ULBs on the recommendations of the 15th Finance Commission by linking fiscal transfers to improved urban service delivery. This will help boost local financial resource generation in ULBs resulting in improved urban governance.

ADB will provide knowledge and advisory support to the Ministry of Housing and Urban Affairs in program implementation, including monitoring and evaluation. It will also support urban local bodies particularly in select low-income states to implement policy reforms, prepare investment plans, and provide recommendations on cross-cutting issues like climate change, environmental and social safeguards assessment, and gender equality and social inclusion.

With increasing urbanization, cities are expected to become a strong engine of growth for India-generating economic activity and outputs, creating jobs for a significant volume of workers, improving competitiveness and urban livability, and protecting the environment.

Performance-based fiscal transfers link central funds to improved urban service delivery to strengthen ULB governance and revenue. A policy-based loan supports national policies and guidelines, followed by state- and ULB-level reform actions to expand piped water, sanitation, and affordable housing access; it conditions support on reforms and provides advisory, monitoring, and safeguards assistance. The program promotes performance-based central fiscal transfers to urban local bodies to link fiscal transfers to improved urban service delivery, strengthen local revenue generation, and enhance governance capacity.