FOR MANOJ Kumar and hundreds of other unemployed labourers camped out under shredded tarps beside a chaotic intersection of this bustling capital, the forthcoming Commonwealth Games was a harbinger of new prosperity: more jobs, better roads and decent housing for their families.

But instead, as New Delhi tries to spruce up and transform itself into a modern city in time for the 2010 games, Kumar finds himself fending off city authorities from bulldozing the shelters where his family and 40 others have lived in tarpaulin and burlap tents for 25 years. For Kumar, it's a case of déjà vu.

"Most of these families were moved here from another part of Delhi to make way for 1982 Asian Games," said Kumar, 35, an ironworker and toolmaker. "Now, the city is moving us again to make way for the Commonwealth Games."

The father of six is not alone. In the months leading up to the games, more than 5000 families have been forced from their homes as the city authorities demolished hundreds of slums and encampments around New Delhi, a crowded, traffic-choked city of 14 million people.

New Delhi already has 150,000 homeless residents - the vast majority of them women and children - a staggering figure that critics say is largely ignored by city leaders.

India's economic boom is fuelling the surge in urban growth as millions of subsistence farmers flee the relentless poverty of the countryside for the hope of better jobs in the cities. Like many of India's large hubs, Delhi has been undergoing massive transformation, with many urban renewal projects spurred by the forthcoming Commonwealth Games, which have been held every four years in Britain and its former colonies since 1930. India hopes to use the games as a springboard for its planned 2020 Olympic bid.

But Delhi's handling of its homeless population has brought into sharp focus a larger problem facing India, an emerging superpower where the needs of the country's 70 million homeless, mostly women and children, are often brushed aside as the gap widens between the haves and the have-nots.

India is spending more than $400 million (£200m) to polish Delhi's image as a first-rate capital, a difficult task for a city that seems to exist between the first and third worlds.

Amid its ritzy, tree-lined neighbourhoods and shining five-star hotels is the reeking squalor of slums, crumbling roads, open sewage, water shortages and almost daily power outages.

Before the games begin, Delhi's chief minister, Sheila Dikshit, has vowed to rid the city of slums, which she says have no place in a modern city. In public statements, she has said that demolishing slums is a humane act, mainly because it forces people to seek alternatives to the crowded squalor of the settlements, which are often illegal and have no running water or electricity.

"The city doesn't want the world to see this," said Anouradha Bakshi, pointing to a grungy row of shanties where dozens of dishevelled street urchins wander among stray dogs and chickens sifting through the garbage along the busy road in south Delhi.

"Delhi wants to present itself as a first-world city, but this shows its failure to provide the most basic services for the poor. We can't just hide our poor or wish them away," said Bakshi, founder of Project Why, a charity that provides free primary education for children from the city's many slums.

More than 300 residents of this settlement, known as Maharana Pratap Camp, have petitioned the Delhi high court to stop the destruction of their shelters by city planners seeking to extend Delhi's subway system - yet another of Delhi's urban renewal projects to be completed before the games.

On Delhi's busy roadways, hordes of barefoot street children peddling paper napkins and necklaces of marigolds have become as much a fixture as cows, which many Hindus - India's predominant religion - consider sacred. Often, the children's parents force them into the traffic to beg, counting on their children's vulnerability to draw out sympathy and spare change from commuters.

Advocates for the city's homeless have tendered numerous plans to provide housing for thousands of people left homeless by slum demolitions.

One plan involves moving about 3000 homeless women and children from the streets of Delhi into an abandoned 14-acre ashram in Rishikesh - about five hours by train north of Delhi - where The Beatles studied meditation with the Maharishi Mahesh Yogi in 1968.

Some city planners have pitched an idea to relocate thousands of the city's beggars, mostly children and handicapped people, into camps on the city's fringes before and during the Commonwealth Games, a plan that critics say hides, rather than solves, the problem.

"We want to see a range of schemes that help children, but this doesn't sound like something we would support. It's not good to uproot children from their normal environment. It's better to integrate them locally," said Renuka Chaudhary, director of India's Ministry of Women and Children.

Ironically, the city's facelift leading up to the games is contributing to its homeless problem as thousands of unskilled labourers and their families migrate to Delhi for construction jobs, most of which pay minimum wage of roughly $4 per day or less. The influx of unskilled workers has led to a sudden mushrooming of tent cities around many of the construction sites.

Still, many in Delhi are optimistic that the Commonwealth Games will be a windfall for both the rich and the poor. The event is expected to bring in more than $17 billion as an estimated one million spectators flock to Delhi's tourist hotels, restaurants and shopping malls during the 11 days of the games.

"Whether they make this city into another Singapore or Hong Kong doesn't matter to us," said Kumar as he eyed the tangle of traffic near his stand of handmade tools. "We're happy the games are here, but we're the ones paying the price to have them."