India launches Urban Challenge Fund

The India — Union Council of Ministers, led by Prime Minister Narendra Modi, has approved the launch of the Urban Challenge Fund (UCF). This new scheme will provide Rs 1 lakh crore in central assistance over five years, aiming to trigger a total investment of Rs 4 lakh crore in India's urban sector by 2031. The UCF represents a paradigm shift from grant-based financing to a market-linked, reform-driven approach for urban infrastructure creation. Cities will be required to raise at least 50% of project costs from market sources like municipal bonds, bank loans, or public-private partnerships, with the central government covering 25% and state/local bodies covering the remainder. Projects will be selected through a competitive 'challenge mode' focusing on high-impact and reform-oriented proposals. A dedicated Rs 5,000 crore corpus will also provide credit guarantees to enhance the creditworthiness of smaller towns and cities, particularly in hilly or North-Eastern states, facilitating their first-time access to market finance. The fund will focus on developing cities as economic growth hubs, redeveloping old city centers, and improving water and sanitation systems.