The Indian government has identified 700 towns with substantial Muslim populations to launch focused programmes to improve their lot.
By Sunil Raman
BBC News, Delhi
A recent government report shows that Muslims in India are even more disadvantaged than low-caste Hindus.
It says a high rate of unemployment and lack of education has led to a decline in their socio-economic standards.
India and Pakistan have the largest Muslim populations in the world, after Indonesia.
A new confidential report prepared by the Planning Commission, based on data from the census department, says a majority of Muslims live in towns and cities of India.
It says around 700 of India's 5,161 towns have substantial numbers of Muslim residents.
The report says Muslims have a relatively higher urban population and many live in urban slums where they have no access to basic needs of housing, education, health and employment.
These areas of "deprivation and discontent" are "happy hunting grounds" for disgruntled groups inside and outside India, it warns.
Indian Muslims mostly live in urban areas
Most of these Muslim-majority towns are close to the international border and the coastline and can lead to security problems for the country, it adds.
The report asks the government to ensure that development schemes are started in these areas to "ensure palpable results in the next two years".
The issue of special development schemes for Muslims is a controversial one with the opposition Hindu nationalist Bharatiya Janata Party questioning it.
BJP leader Shahnawaz Hussain told the BBC, "The Congress Party governed India for 50 years and did little for Muslims. The latest moves are politically motivated," he said.
In the run-up to the federal budget due later this month, the government commissioned an expert committee report on ways to improve educational skills of Muslims.
A group of mostly academics, headed by MAA Fatmi - a junior minister in Prime Minister Manmohan Singh's government - submitted its report on Tuesday.
The Fatmi Committee was asked to suggest how to implement the recommendations of Sachar Committee, which was set up in March 2005 to review the state of Indian Muslims.
The Sachar Committee submitted its report in November last year.
There is a growing sense of insecurity in the community
The report said India's Muslims were poorer and less educated and suffered from higher unemployment and greater mortality than other religious groups
A committee member, vice-chancellor of Hyderabad University Seyed E Hasnain, told the BBC that "specific measures have been recommended" but no time-frame has been suggested for their implementation
India's centre-left federal government has focused a lot of attention on the plight of Muslims since it won the 2004 general elections.
Prime Minister Singh has lost no opportunity to address the Muslim constituency in the country and has promised to improve their condition.
Soon after coming to power he spoke of his "distress" at the low representation of Muslims in government as well as in private sector jobs.
Last year, he urged state chief ministers to recruit "more Muslims into the police and intelligence agencies" to help counter a growing sense of insecurity in the community.
Mr Singh's remarks that Muslims "must have the first claim on resources" landed him in a lot of controversy.
His later attempts to retract from that statement did not in any way stop the BJP from accusing his government of trying to "appease" the Muslims for electoral gains.