Recognizing urban India

In May, a government of India Press Information Bureau release stated that the ministry of urban development had directed state governments to convert census towns to urban local bodies to allow for planned development and efficient service provision. Census towns are areas that are governed by village panchayats but are recognized by the census of India as being urban. This mismatch leads to a host of problems—from misallocation of resources to unsafe development of densely populated clusters. Much of India has long left her villages, and it is a welcome sign that the government is starting to acknowledge this. But the extent of urbanization in India is still widely underestimated. Urbanization has an important role to play in a country’s economic growth and so it is critical to get it right.

According to the 2011 census, there are 3,894 census towns spread across states. Maharashtra paid heed to the ministry’s notice and recently granted urban local body status to 19 census towns in the Pune region.

The ultimate decision to convert census towns to statutory urban local bodies rests with state governments. Municipal laws in some states specify guidelines such as population and density thresholds for notifying areas as urban local bodies, but these guidelines vary widely. For instance, Tamil Nadu and Maharashtra have population thresholds of 30,000 and 25,000, respectively, for classifying an area as urban, whereas states such as Kerala and Punjab have no such criteria. Moreover, these guidelines are not binding and state governments can exercise discretion in notifying areas.

An IDFC Institute paper by these authors along with Mudit Kapoor found that only 26% of India is governed by urban local bodies as of 2011. The rate varies across states with small hill states such as Mizoram (37%), Nagaland (26%) and Manipur (25%) surprisingly having a higher percentage of its population governed as urban than larger states such as West Bengal (23%), Bihar (11%) and Kerala (16%).

Having differing and flexible guidelines makes sense given the heterogeneity across states. But differing guidelines are only meaningful if they are able to capture the true urban and rural characteristics of places across states. In our study cited, we found that this is not the case. At the state level, we found that the extent of areas governed as urban has a weak relationship with income, poverty and population working in non-agricultural activities, all of which are thought to be correlates of urbanization.

In an opinion piece in this newspaper (Chasing definitions in India), we argued that the official modes of recognizing urban areas in India underestimate the true extent of urbanization.

Using the census definition, India is 31% urban. But we found that if we apply Ghana’s definition of urban, India is 47% urban, and if we apply Mexico’s definition, India is 65% urban. The differences in urbanization rates are even starker at a subnational level. For instance, Kerala is an anomaly and goes from being around 16% urban as per the administrative definition to over 99% urban using Ghana’s and Mexico’s definitions.

Following the news of the central government’s directive to convert census towns to urban local bodies, a national newspaper reported that the secretary of local self-government in Kerala, A.P.M. Mohammed Hanish, suggested that the minimum population threshold to upgrade areas to an urban status should be increased to 25,000—a benchmark that is so high that no country uses it in its urban definition to the best of our knowledge. He stated, “If the parameters prescribed by the Union ministry were strictly followed, there may not be any panchayat left in the state.” This corresponds exactly to our findings of Kerala already being almost completely urban when we apply other definitions. It also emphasizes the reluctance of state governments to recognize that urbanization is a reality.

This desire to stay rural may stem out of perceived advantages that are enjoyed by rural areas, such as access to funding through rural development schemes or lower taxes. However, these advantages may not necessarily exist. In our study, we investigated whether areas that are urban in nature but governed by panchayats make disproportionately more use of the Mahatma Gandhi National Rural Employment Guarantee Scheme, but found no evidence to support this conjecture. Thus, while staying rural may not confer the benefits some imagine they will receive, the real losers from the state governments’ actions are the de facto urban areas that are deprived of the benefits of planned development and amenities and services provided to officially urban settlements.

India cannot afford to govern its settlements in such an arbitrary manner, and the ministry of urban development’s move is one in a series of many steps required to address the lacunae in the current rural-urban categorization system, prevent misallocation of resources, provide efficient services and governance structures, and leverage the ongoing structural transformation to boost economic development.

India is more urban than we think. Finally, policymakers are coming round to reckoning with this reality.

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