Urbanisation is good

Written by Bibek Debroy | Updated: May 4 2009, 08:20am hrs
A countrys per capita income is an indicator of its level of well-being, or poverty. Without getting into differences between gross national income and gross domestic product, per capita national income is national income divided by total population. Not all of that population is in the work-force. Everything else remaining the same, the higher the average productivity of the working-age population, the greater will be a countrys per capita income and level of well-being. Thats how every country in the world has developed and prospered, by increasing the productivity of the work-force. Thats exactly what India has to doincrease the productivity of its young population. Increasing productivity in the same occupation is always difficult. However, what distinguishes a rapid period of demographic transition and fast development is that productivity increases dont have to occur in the same occupation, or even for the present working generation. The next generation moves up the ladder, not just vertically, but horizontally too. In the history of economic development, four occupational shifts have gone hand in hand with progressa shift from rural to urban, a shift from farm to non-farm, a shift from the unorganised to the organised and a shift from subsistence self-employment to decent wage employment. There are policy constraints that inhibit these shifts in India. The argument is that had it not been for policy-induced constraints, these shifts would have occurred naturally and India would have been a less poor country than it is today. In this article, we will take up the first transition rural to urban.

Where is Indias work-force employed The NSS (National Sample Survey) doesnt provide large-sample answers to this question every year. On an average, that answer is available once every five years. The last year for which that answer is available is 2004-05, the 61 st Round of the NSS.

In 2004-05, Indias labour force was 420 million. The work force was 385 million and 35 million were therefore unemployed, though it is impossible to figure out whether they were unemployed voluntarily or involuntarily. In these terms, 8.28% was the unemployment rate. Out of the labour force of 420 million, 303 million was in rural India and 116 million was in urban India. Out of the work force of 385 million, 278 million was in rural India and 107 million was in urban India. The more general figure given is that of the total population that lives in rural or urban India. The 2001 Census shows that 74.27% of Indias population lives in rural India, while 25.73% lives in urban India. There are 384 urban agglomerations, 5161 towns, 27 million-plus cities and 35 million-plus urban agglomerations. An urban agglomeration is a continuous urban spread with a city, and its adjoining urban growth. There are some areas that are classified as towns in a statutory way, in the sense that a municipality, corporation, Cantonment Board or notified town area committee exists. More generally, the Census defines urban as an area with a minimum population of 5,000, with at least 75% of the male working-age population engaged in non-agricultural pursuits and a population density of at least 400 per sq km. More to the point, there are 638,365 villages, some uninhabited. The number of inhabited villages in 2001, at 593,643. Should we plan for people to stay in rural India or should we plan for an urban India, remembering that urbanisation is slower in India than in many parts of the developing world Not only is urbanisation lower in India than in developed countries, and even in several developing countries, it has also slowed over the decades. For instance, between 1971-81 the annual average rate of urbanisation was 3.79%, but declined to 3.09% between 1981- 1991 and to 2.73% between 1991- 2001. This happens when more than 50% of the worlds more than 6 billion population lives in urban areas. 2007 represents a landmark in the history of human civilisation, because that is the year when the worlds urban population first crossed the worlds rural population.

Urbanisation is good and desirable. It goes hand in hand with economic development. Thats why textbooks seeking to describe invariably cite rural populations as an indicator of under-development. Yet, if one extrapolates present trends, urbanisation levels in India around 2030 are likely to be in the region of 35% and no more. This needs to be accelerated. It is worth mentioning that in 2004-05, Indias urban poverty ratio of 25.7% was below the rural poverty ratio of 28.3%.

There are several reasons why villages disappear. Thanks to migration and improved connectivity, some disappear. Others become mainstreamed into urban agglomerations or are reclassified as development proceeds. All these are desirable developments. The average population in an Indian village is 1,161 and this doesnt make the village viable, to provide physical or social infrastructure. 91,555 of Indias villages have population sizes less than 200 and 12,644 of them are in Orissa, with other large numbers in Himachal, Uttaranchal, Rajasthan, UP, Jharkhand and MP. Another 127,515 of villages have population sizes less than 499; 14,806 have population sizes more than 5,000; and 3,962 have population sizes more than 10,000. The idea is not to have a quota on the number of villages. Instead, the argument is that if urban planning is properly undertaken, more than 200,000 of Indias villages will disappear, as they should, and we will have larger villages or towns with populations upwards of 10,000 and even crossing 100,000.

There are three kinds of resistance against this first transition, from rural to urban. The first is a sentimental association with some notion of a rural Arcadia, usually articulated by those who have never lived in rural India. They have no idea about the deprivation rural India represents. The second kind of argument is based on the premise that with this transition, India will no longer be able to feed its increasing population. This fails to appreciate the low productivity levels Indian agriculture possesses, not only in comparisons with the rest of the world, but also in comparisons between Indias irrigated and non-irrigated areas, with irrigation having so far benefited only 40% of the cultivated area. If required agricultural reforms are introduced, India will have no problems in feeding double its present population. The third argument is directed against the kind of urban life that is delivered, with pressures on urban infrastructure like water supply, sewage clearance and drainage, waste disposal, transportation, power, housing, law and order and environmental pollution issues. After all, the slum population in 2001 was estimated to be 61.82 million, with 640 towns reporting slum populations. This is less an argument against urbanisation and more an argument against the kind of urbanisation that has taken place. 68.9% of the urban population is in Category I cities and 37% of the urban population lives in the 35 million-plus cities. Indeed, urbanisation has been occurring in these mega cities.

The point is that both push and pull factors are distorted. They are distorted in terms of preventing urbanization and creating disincentives against rural to urban migration. And they are also distorted in terms of creating the wrong kind of urbanization. If these policy-induced distortions are removed, the right kind of rural to urban transition will occur and that is the way to a more prosperous future.

Bibek Debroy is a noted economist and Laveesh Bhandari is head of the economics research firm Indicus Analytics