India’s water story has made real progress. The Jal Jeevan Mission has brought tap water to nearly eight out of every 10 rural households. While urban water supply is not without its challenges, at least there is intermittent supply in most towns and cities. However, the images of India’s water challenges are shifting. One is the village that still waits for a reliable connection, and the second is the city which floods every now and then due to erratic and heavy rain. In between the two, there is a missing middle — a vast, overlooked landscape which has both challenges and opportunities.

This is India’s peri-urban expanse: a zone where farmland and scattered habitations give way to factory sheds, and densely cluttered settlements. Over the last two decades, the number of Census towns has jumped from 1,362 to 3,784, a 178% increase. These are not villages anymore, but neither are they recognised as cities. Nowhere does this institutional limbo exact a higher price than in water and sanitation.

A middle ground

Take, for example, the Rawta village on the edge of Delhi. Residents here receive water through a pipeline at a common collection point, but only on alternate days, and that too between 7 p.m. and midnight. Families sacrifice sleep to fetch water. Private vendors selling water exploit this gap. Or consider Gurugram, where rural governance was abolished and peri-urban areas were placed under the municipal corporation which struggles with administrative inefficiencies. Residents are left with the worst of both worlds: urban prices without urban services.

Moreover, such consequences ripple beyond convenience. In peri-urban Hyderabad, toxic leachate from waste dumps has contaminated groundwater. And when cities grow thirsty, they reach outward. The Bisalpur dam, originally built to irrigate Tonk and Sawai Madhopur, now prioritises Jaipur’s growing water demand, leaving downstream farmers to bear the cost. When water moves from rural to urban areas without accountable governance, the peri-urban becomes a zone of sacrifice.

Sanitation tells a similar story. Nearly 40 million urban households rely on on-site systems such as septic tanks. However, desludging is irregular — often only when tanks overflow — and illegal dumping of septage into rivers and open fields is routine. A single 5,000-litre tanker discharging its load into the open undoes the work of thousands of toilets constructed under the Swachh Bharat Mission.

By 2047, the country will need 230 million new housing units and 500 new cities. Today’s peri-urban fringe is tomorrow’s city centre. Whether we plan for it deliberately or inherit a legacy of chronic challenges is a choice one has to make right now.

A plan of action

That choice requires five clear actions. First, the governance vacuum has to be resolved. State governments must constitute Nagar Panchayats for all Census towns, as the 74th Constitutional Amendment envisioned. Where the transition has already occurred, functional capacity must follow legal reclassification. Small-scale experiments such as the multi-stakeholder platform in Sultanpur village, which brought together engineers, panchayat members and residents, show that accountability can be built when institutions are forced to coordinate. Second, drinking water sources must be secured at their origin itself. The Jal Jeevan Mission succeeded in expanding tap connections, but source sustainability needs relentless focus. This means protecting catchments from encroachment, preventing solid waste dumping, and adopting community-driven sanitary inspections of local water sources, an approach that has already worked in Maharashtra.

Third, there should be a Swachh Bharat Mission 3.0 with an explicit focus on peri-urban sanitation. This mission, ideally housed under the Ministry of Jal Shakti and leveraging rural employment guarantee schemes, should prioritise faecal sludge and septage management. Its priorities should be to build faecal sludge treatment plants where sewage treatment plants are beyond 15-20 km; deploy GPS-equipped desludging trucks to prevent illegal dumping; and introduce mini-cesspool vehicles for narrow lanes, as Berhampur in Odisha has done. Desludging costs, which can range from ₹1,500-₹6,000 per trip, should be folded into monthly water bills through a small sanitation levy.

Fourth, decentralised wastewater treatment technologies should be scaled up. Startups such as Indra Water and Tigreen have built modular, plug-and-play systems that treat used water close to its source, recovering over 95% of water with minimal land and energy use. But these remain at the incubation level. They need clear policy signals, single-window clearances for green industries, public procurement mandates, and government-backed guarantees that create a market for treated used water. Fifth, peri-urban water should be financed as strategic infrastructure. The Uttarakhand model — a blended finance structure combining State risk-bearing with World Bank concessional loans linked to disbursement indicators — offers a template. Similar mechanisms can extend to septage and decentralised treatment.

India’s water future will be decided in these zones. Peri-urban India has the numbers, the economic dynamism, and the demographic weight to demand better. If we act now, the missing middle can become the core: dense, thriving, and water-secure.

Parameswaran Iyer is Executive Director at the World Bank. Arunabha Ghosh is CEO at the Council on Energy, Environment and Water (CEEW). Richard Damania is Chief Economic Advisor in the Planet Vice Presidency of the World Bank. They are the co-authors of ‘Water, Nature, Progress: Solutions for a New India’. Views expressed are personal.