Is India 47 per cent urban, or 31 per cent? While everyone compares levels of urbanisation between countries, few realise that every country defines urbanisation in its own way. Standard criteria involve population size and density.
Using only these, India’s urbanisation would be much higher than the widely known 31 per cent official rate. India, however, is among the few countries to apply a third criterion while classifying a habitation as urban — that at most 25 per cent working males should be in agriculture. If one just adds the population with villages that have more than 5,000 people, urbanisation would jump to 47 per cent. If you include villages with more than 2,000 people, the ratio would be 71 per cent.
Definitions are usually created to aid policy and one can venture a guess on why early policymakers in India chose this one. They may have thought that habitations dependent on agriculture needed to be administered differently. However, the assumption that rural means agriculture is now already anachronistic. Three years ago, we estimated that only a fourth of rural output came from agriculture as against nearly half in 2002 — this ratio would likely be lower now.
One of the problems with Indian commentators has been their instinctive aping of the West (and now also the East), irrespective of what is really needed in India. Simplistic assumptions that equate urbanisation with higher productivity confuse cause with effect, and also the end-goal with the path.
There is also an illusion of control, with Central administrators far more confident of their ability to plan the living styles and standards of a sixth of humanity than any change manager would think was realistic. While China seems to have shown one model of rapid urbanisation, its sustainability is yet to be proven, and its approach may be harder to replicate in a purely democratic set-up like India’s.
It is also likely that India’s growth will be less manufacturing-intensive and more focused on domestic demand than China’s was. A more diffuse urbanisation is therefore more likely in India than the mega-cities that we continue to struggle to manage and yet, all our policies seem to aspire towards.
Towns and cities are basically densely populated habitations that allow cheaper access to services like education, health or entertainment through economies of scale, and also benefit from the network effect of organisations and employees in close proximity. Employees have alternatives in seeking employment, as do employers when they hire for a diverse set of skills. Not surprisingly, urbanisation became necessary for humans only when manufacturing and services started to dominate output.
However, these networks form and develop on their own, mostly due to local factors, and centralised control is unlikely to be fully effective. Throwing money from New Delhi to distant towns to modernise bus fleets or build that extra flyover may help some egos and manifestos, but one must explore if alternative methods of improving the productivity of our citizens would be more effective.
As in most aspects, the country is already moving in the right direction, irrespective of outdated government policies.
The construction of roads linking villages and a sharp rise in rural tele-density and electrification are creating economic clusters away from the big cities. The upcoming surge in broadband penetration through 4G networks is likely to accelerate this process. Even in the last decade, population growth in almost all the large urban centres was less than urban population growth — a large part of urbanisation happened due to a 60 per cent increase in the number of towns.
About two years ago, I remember visiting a village in Madhya Pradesh as part of my research. Nearly all the houses were pukka, that is, made of brick and cement; every house was electrified and many had inverters. Every household had at least one cellphone, there was a satellite TV dish on nearly every roof I could see, and I was told many had air-conditioners. Apparently three-fourths of the households had a motorcycle, and six had cars. Although I could not verify it, the presence of a giant water tank (the type from which, in that classic scene from the movie Sholay, Dharmendra’s character Veeru threatened to jump if he did not get Basanti’s hand in marriage) suggested running water in many houses. One of the hottest selling items in the well-stocked grocery store was “Gulab Jamun Instant Mix”, an aspirational consumption item for urban middle-class households when I was growing up.
It made me wonder how this “village” offered a quality of life in any way inferior to some of the “towns” I have seen in India. Or for that matter, the chawls and slums right outside my building in Mumbai. Would classifying this habitation as a “town” have resolved some of the shortcomings too? Schooling seemed primitive, and high-schoolgoers had to go to the nearby town, but even within the big cities children do travel 15-20 kilometres each way for good schools. Town was where healthcare was too, even though an ambulance-on-call service made things a lot easier.
About the same time, as part of our “India’s Silent Transformation” project, our team members had been visiting villages across states. They heard many stories like: “The first engineer from our village lives in Bangalore, and earns Rs 25,000 a month, but lives in shared accommodation and saves almost nothing; I earn only 10,000, but I live like a king,” or “Once the road to our village came up, I didn’t need to stay in the town where I work — I now commute from my village home.”
A change in policies can improve the pace of such changes. To start with, the definitions and legal framework — given that most benefits of urban living seem to arise from population density and size, it may be time to jettison the third mandatory criterion of urbanisation, and start thinking of India as 47 per cent or even 71 per cent urban. Creative slogans like “urban infrastructure in rural areas” should be unnecessary. It’s unfortunate that our policies presume thousands of habitations don’t deserve urban amenities, whereas in most other countries they would have. China seems to have dropped this agriculture-related requirement after 1999.
If that redefinition proves to be too tricky politically and administratively, it would help to give “Census Towns” municipal governments instead of village councils. These are habitations that the government still calls villages, but the Census Bureau finds now have all the characteristics of a town. Their number nearly tripled between 2001 and 2011, and they are now half of India’s 7,935 townships. That’s half of India’s townships governed by gram panchayats (village councils).
More than 90 per cent of the nearly 2,800 new towns that were formed in the last decade are “Census Towns”, and as jobs move away from agriculture, this trend is only likely to accelerate. Just ensuring that state governments accelerate the process of creating municipal governments for these habitations would be a big step forward. Devolving more powers to urban governments and making them more directly and politically responsible for urban infrastructure is likely to be more effective than trying to control development through Centrally administered schemes.
The writer is head of Equity Strategy India, Credit Suisse