Work on getting city-led growth right: Make the process of urbanisation sustainable, inclusive and productive

Make the process of urbanisation sustainable, resilient, inclusive and productive, rather than considering a model that aims to curb the growth of large cities.

Determining an ‘optimal’ size of cities was an important research theme in urban economics in the 1960s and the 1970s, globally as also in India.
Determining an ‘optimal’ size of cities was an important research theme in urban economics in the 1960s and the 1970s, globally as also in India.

In a somewhat assertive article titled ‘Reimagining the city’ (Indian Express, June 8;, Rajiv Kumar (vice-chairman, NITI Aayog) and Srijan Pal Singh (Dr Kalam Centre) have proposed that the existing urban and metro-centred habitation model should be reviewed, and in its place an alternative model that is ‘more frugal, more sustainable’ and which offers ‘more satisfying lifestyles and higher welfare levels’ be considered.

The authors show a preference for a model ‘where agriculture, industry, and service sectors are in sync for sustainable development’ and ‘which is in harmony with nature’. Specific mention is made in the article of Mahatma Gandhi’s model of ‘gram swaraj’, APJ Abdul Kalam’s vision of providing urban amenities in rural areas, and Nanaji Deshmukh’s idea of self-reliant village development as possible pathways for the future. Prima facie, the proposed model has a strong appeal; most countrymen at this time, having been witness to the most gruesome outward migration of millions of people from large cities, would opt for a change in the way city spaces are currently organised for living and livelihood.

The proposed model (KS model, in short) constitutes a major departure from the existing development practices and strategies, and whichever way it may be looked at, has extremely important implications for the future course of India’s development. It is, therefore, necessary that the KS model is systematically examined, both within and outside the system. The purpose of this rejoinder is to set off a debate not as much on the KS model as on the premises it is based on. Two such premises are discussed here: (1) cities of over 1 million population develop diseconomies of scale where the returns are not commensurate with the size of cities, and (2) the advantage that large metro cities have enjoyed in ‘agglomeration economies’ stand neutralised with advances in digitisation; digitisation has made spatial proximity of industry and businesses unnecessary. The authors use these premises to build a case for an alternative habitation model. Let me take these in sequence.

The issue of scale diseconomies
Determining an ‘optimal’ size of cities was an important research theme in urban economics in the 1960s and the 1970s, globally as also in India. The core of research centred around a U-shaped cost curve, which hypothesised that the unit cost of supplying infrastructure and services tended to be high in small cities, costs tended to decline over a range of intermediate-sized cities, and to rise with cities attaining certain sizes. This hypothesis underlies the KS model. It was put to test in India in a 1968 study of cities of various sizes which attested to the high unit costs of delivering services in small cities as also to its decline as city size increased, but concluded that the cost curve did not rise as stipulated with the expansion in the size of cities. Instead, the unit costs tapered off. There were no cost diseconomies (Stanford Research Institute, 1968).

Several theoretical contributions of that period also ended up by asking ‘how big is too big’ and ‘how big is big enough’ (William Alonso, 1970).

Significantly, studies during those years did not focus on comparing per capita city products net of costs imposed by pollution, crime, congestion, etc, for different sizes of cities. Interest in issues of city size, however, began to dip in the 1980s, with worldwide recognition that (1) changing the size distribution of cities was a long-term and a costly exercise, and (2) well-managed cities were central to economic growth and poverty reduction—city size was of no consequence. Several Indian cities have since grown into mega sizes and become a part of the international marketplace. In the light of this and with no fresh empirical data, the position advanced in the KS model appears difficult to accept and sustain.

Agglomeration economies, digitisation, and the urban structure
That agglomeration helps in reducing transport and communication costs and generating economies has long been an important parameter for individuals, businesses and industry to decide where to live and where to work. Agglomeration economies have served as the principal raison d’être for large cities. The authors suggest that as a result of digitisation and the ‘cloud’ as the new interactive space, the advantages of agglomeration have dispersed across geographies in India and large cities are no longer the only choices for businesses to gain from knowledge, information and a pool of skilled labour that agglomeration generates. The question is: Does this development make large cities redundant? Has this affected the composition of city sizes?

There is no denying that digitisation has, in a short spell, made deep penetration into the Indian economy. Its effects especially on the delivery of services are observed countrywide. There are new platforms to do multifarious tasks. On the other hand, the impact of digitisation on India’s urban structure, i.e. the size distribution of cities, is neither observed nor is it evident. There is as yet no model that has attempted to assess the effects of digitisation on city size distribution. Any observations on this aspect are, therefore, intuitive. There are two important facts, however, that suggest that even with its potentially large outreach, digitisation may not have much of an impact on city size, especially on large cities. First, digitisation is just one of the many factors that contribute to determining a country’s urban structure, the prime factor being the population increase (births minus deaths) that, on average, accounts for 40-45% and in some cases 60-65% increase in the size of cities. The second major factor is the large urban informal economy with a huge demographic base. The part of India’s urban economy that is ‘digitised’, while economically important, is small in demographic terms. For this reason, as shown by the decennial censuses, the size distribution of cities has continued to run its historical course, without any dramatic disruption. Large cities in India have risen in numbers with every census and are projected to increase to 78 by the year 2035 (United Nations; 2018). Their demographic mojo stays unaffected by technological advances.

Two concluding points: One, India has taken several decades to recognise the potential of urbanisation. In the initial decades of planning, the thrust was on curbing the growth of large cities. Two quotes from the Fourth and Fifth Five Year Plans, which, incidentally are similar to those advocated in the KS model, are relevant here: “The social and economic costs of servicing large concentration of population are prohibitive. Beyond a certain limit, unit costs of providing utilities and services increase rapidly with increase in the size of cities” (4th Plan pp399); “The thrust of the urbanisation policy must, therefore, be to slow down and if possible reverse the rate of growth of the metropolitan cities” (5th Plan pp243). These policy statements supported by a CSS on small and intermediate cities made no effect on the pace or the pattern of urbanisation in the country. Indeed, the census decade 1971-81 registered what has thus far been the highest rate of urban population growth in the country.

Lessons are clear: The processes of urbanisation are a given (Polese: 2014) and likely to persist. According to the United Nations (2018), India’s rural population will begin to decline in absolute numbers from about 2027 onwards, whereafter population growth in India will wholly be an urban story. The task, thus, is to accept the inevitable and work on making the process of urbanisation sustainable, resilient, inclusive and productive, rather than to consider a model that aims at curbing the growth of large cities.

Second, Covid-19 has exposed how inadequate and poor is our knowledge base on cities and urbanisation, the role of migration in city economies, the place and functioning of the urban informal sector, issues of the economies and diseconomies, the effects of digitisation on agglomeration, and many more similar aspects. The country needs an informed and empirically tested base to draw upon for deciding the model that best suits India’s future development.

The author is former IDFC Chair, NIPFP, and former director & distinguished professor, NIUA

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