Towns and country

How India handles urbanisation will be crucial in figuring out whether its transition to industrialisation,and to a stable,inclusive high-growth path,is possible. Its easy,too,to think of urbanisation as a metropolitan phenomenon,something that will be driven by the five or six great historical centres of urban life. But,as a recent Morgan Stanley report makes clear,it is Indias smaller cities that are driving the urbanisation process. The report,which introduces a vibrancy index,tries to map what researchers think are the key drivers of urbanisation: physical infrastructure,financial penetration,consumer services and job listings. And it covers Indias top 200 urban centres,including several towns.

In their rankings,a sense of how cities can be strangled emerges with surprising ease. One giveaway clue is that Mumbai,still in imagination the beating heart of Indias growth,isnt even in the top 20 in terms of dynamism suffering,for example,in terms of financial penetration. Thats a sad reflection on how we have failed to include the urban working class in our attempts to deepen and broaden the financial sector. The Raghuram Rajan report has important suggestions on how to enable credit access,for example,among those that are mobile for economic reasons. This is another reminder of its importance.

Other important clues are provided by a general examination of those cities in the top 50 that are underperforming in terms of dynamism for their income level. Whether high income (Srinagar,Guwahati) or low (Dhanbad,Kanpur,Asansol,Gwalior),these are cities where connectivity to markets,particularly world markets,continues to be an issue. Nashik,Meerut,Kozhikode and Vadodara demonstrate the value of such access. Better highways and ports are central.

Finally,the crucial takeaway: the top 50 cities grew consumption at half the pace of the next 150. Similar,though less sharp results,exist for financial penetration. This report is another strong source of evidence that Indias growth is becoming driven by its smaller towns. Its politics and policy must follow this trend.