The development of a country is often correlated with the process of rapid urbanisation, which entails an occupational shift from rural agricultural livelihoods to one that involves more industrial and tertiary activities. Besides changes in core economic life, urban livelihood is closely linked to modernity that implies cultural and civic values vastly different from feudal interpersonal relationships existing in rural India. A close association between urban growth in India of industries and rapid urbanisation was the general feature. Of late this association seems to be weakening with new cities and towns emerging as service hubs.
Urban growth in India attracts the rural population with expectations of higher earnings. This gives rise to a stream of migration from rural to urban areas. The persistence of earning differences eventually gives rise to declining opportunities in the formal segment of the economy, resulting in the growth of the informal sector often characterised by low paying, low skilled jobs. The same process leads to congestion in cities with the economy distributed asymmetrically in favour of urban segments.
The ‘Revision of World Urbanisation Prospects’, 2011, published by the United Nations, analyses the rural urban distribution of population for 231 countries for the period 1950 to 2050. It states that about 52.1 per cent of the world population lived in urban areas in 2011. The Report adds that about 78 per cent of the inhabitants of developed countries lived in urban areas whereas the figure was only 47 per cent for less developed countries. It is estimated that 67 per cent of the world population would live in urban areas in 2050, and for developed and developing countries the share would be 86 per cent and 64 per cent respectively.
Asia and Africa, which currently have a low share of urban population, 49 and 39.6 per cent respectively, are however expected to reach the 50 per cent mark by 2020 and 2035 respectively—estimates the Report. This data suggests that over the next four decades’ urban areas would absorb the major share of population growth. The increase is likely to take place in developing countries as they have greater scope for urban expansion, enabling a shift of population. Also, following the economic transitions trends of the world, the dependence on primary activities will decline and secondary and tertiary activities will become more important which will lead to urbanisation of larger areas.
As per the 2011 Census more than 377 million people, constituting 31.16 per cent of the total population, live in urban areas in India. The number of urban agglomerations (UAs)/towns which have a population of at least one hundred thousand has increased from 394 in Census 2001 to 468 in Census 2011; 70 per cent of the urban population in our country live in these UAs/towns. The million plus UAs/towns (53 out of the 468) each with a population above one million constitutes 42.6 per cent of urban growth in India. The number of such cities increased by 18 in 2011 compared to the last Census. On the other hand, the three mega cities namely Greater Mumbai, Delhi and Kolkata with more than 10 million people, experienced a decline in population growth compared to the earlier periods.
There is no doubt that India has been urbanising rapidly with the share of urban population increasing from 17.3 per cent in 1951 to 31.2 per cent in 2011. However, a closer look (Fig. 1) reveals that the growth rate reached its peak in 1981; thereafter it declined, to accelerate once again during 2001 to 2011. The recent turnaround is being attributed to the economic growth in the past decade (1990 -91 to 2000-01) where the average growth rate was close to 5.7 per cent; and in the next decade till 2007-08 it was as high as 7.5 per cent on an average, including three subsequent years of above 9 per cent growth rates (planningcommission.gov.in).
The nature of urbanisation has also undergone changes. Like many Asian countries, expansion in India is increasingly dependent on growth in trade, hotels and restaurants, transport, storage and communication, financial and business services, etc. In fact, there has been massive occupational shift of about 17 per cent from agriculture and allied activities to non-agriculture in the past two decades (National Sample Survey Organisation, various years), which is largely attributable to the decade long agrarian crisis resulting in lower returns, increased vulnerability and financial insolvency—forcing people to think of alternative activities mostly in the informal segments. The other reason being the urban growth in India of high value adding services that involves a small share of the urban workforce. Though the relative strengths of the ‘push’ and ‘pull’ change over time, it is difficult to ignore that many occupations in the urban segments are even less productive and less remunerative compared to agricultural activities.
The influx of people from rural areas, however, shows a declining trend implying that net migration is a relatively minor factor in urbanisation – characteristic of declining expectations of higher differential returns compared to that from rural incomes due to increased congestion.
The declining absorption capacities of large cities is also reflected by its declining trend in growth. In fact, urban growth in India is far more dependent on smaller towns and cities. During the period 2000 to 2005, Surat recorded the highest compound annual growth rate (CAGR) of population—5.68 per cent – and Thiruvananthapuram the lowest – 0.93 per cent. Other cities like Jammu, Bhiwandi, Rajkot, Raipur, Moradabad, Solapur and Ranchi recorded higher CAGR of population of above 3 per cent. The only mega city that recorded CAGR of population more than 3 per cent was Delhi with 4.38 per cent (United Nations, 2009). The rise of the small towns and cities primarily reflects the outgrowth and spill overs from large agglomerates. Increase in non-farm employment creates a peri-urban growth in India that eventually turns into a small town, which accounted for the rise of census towns by 2532 in the past decade.
According to Census 2011, the two states of Bihar and Odisha have an 11.3 per cent and 16.7 per cent share of urban population, respectively, while Tamil Nadu, Kerala, Maharashtra and Gujarat have more than 40 per cent urban population (Table 1). Among the top four urbanising states, Kerala has shown steep increase in the share of urban population over the past three decades. Despite the fact that the share of non-agricultural output and employment increased for all states, urban growth in India was not uniform primarily because of the nature of non-agricultural occupation and the differences in value added that exist across regions. In other words, although the increments in the share of employment in the non-agriculture sector were more or less similar for all the states, value additions in industrial and service activities were not evenly distributed across states since that largely depends on the level of industrialisation. In fact, the top ranking states in terms of urbanisation are also the states where the share of non-agricultural output is roughly more than 75 per cent.
Though the process of urbanisation in India has picked up in the recent years, the pace of growth had been less compared to China. One major reason that accounts for the difference in the growth of urban agglomerates in the two countries might be the difference in the growth trajectories itself. Urban growth in India is largely service led while manufacturing contributes a large part in the high urban growth of China. We understand that linear models (assuming subsequent importance of agriculture, industry and services) do not necessarily need to be considered as the ideal trajectory, but one can hardly deny the fact that manufacturing growth could be a better engine than the services as this sector generally has a higher multiplier effect compared to services. Also services require a higher proportion of manufactured inputs as compared to services inputs required by the manufacturing sector. Moreover, although the income elasticity of demand for manufacturing products are quite similar to that of services beyond a threshold income, the potential for productivity growth of manufacturing is higher than that of services. The moot point is that early de-industrialisation in India might have restricted the pace of urban growth in India. Service demands depend on high urban growth in India of per capita income and can be sustained in large countries like India only if it is backed by high income generating agriculture and manufacturing activities. However, urbanisation delinked from industrialisation would only depend on diffusion of similar consumption habits. In the case of India there is of course an increasing convergence across classes, at least in the sphere of retail consumption habits and that creates a demand for similar kinds of goods across regions reducing the rural-urban gap in terms of non-durable consumption patterns. As a result, urbanisation has been largely trade driven which has very little backward linkages compared to that driven by manufacturing growth. To keep the ball rolling there needs to be a process of redistribution of income that would make the demand for manufactured goods and services more equitable and sustainable at the same time.