This concentration of people required more services both because of the sheer higher concentration of people and because of the lack of private money to backstop gaps. At the same time, those areas received less services/investment precisely because the people who lived there were not powerful. This gap of services lead to increased crime due to factors such as lack of opportunity, increased drug abuse due to hopelessness, worse education options, etc.

The gap widened and got worse until it became untenable to maintain (and in some cases the land became too valuable) and political power was used to disperse the public housing population.

Your comparison of Dharavi to the situation in American public housing projects is fallacious because it draws the equivalency based on Dharavi's dirtiness while ignoring how incredibly dissimilar the places are.

[1] http://in.reuters.com/article/india-landrights-slum-idINKCN1...

This can be the situation in places with centrally managed economies like North Korea today. Obviously, they are also very safe (from the regular criminal behaviour point of view).

Also strung out drug addicts are likely to be driven to theft.