The policy environment in India has undergone radical change in the last 20 years as a result of economic reforms, and not surprisingly the approach to urban development has also been affected. There is growing recognition on the part of policy-makers that cities play a crucial role in the national economy, and current policies mark a significant rupture from those followed over the years, some dating back to the 1960s. Of particular interest here is the rehabilitation of large cities in the overall approach to urban development, as exemplified by the JNNURM. Based on two compelling, though not fully comparable case studies, Hyderabad and Mumbai, this article argues that both the Union and state governments are adopting city-centric growth strategies, following international trends, and that these have far-reaching social and spatial implications and in terms of governance. The policy shift calls for a serious re-examination of intergovernmental responsibilities, functions and financial transfers in order to ensure that the larger social issues are included in city strategic planning. In both cities, the ongoing processes are contentious and contradictory, providing a stark contrast to the smooth vision statements that convey an image of the quest for "development" as a consensual process.