India has long been known as a land of contrasts. Recall what the British economist Joan Robinson famously said of India: “Whatever you can rightly say about India, the opposite is also true.” This is as true today as it was back in the early years of the 20th century, when it was said.
According to a report by research agency PRICE and Tata Sons titled The Many Urban Indias, while India’s top 100 cities that account for less than a fifth of our population generate over a third of the income and make up 31% of consumption, just a few cities account for an outsized share. The six metros of Delhi, Mumbai, Bengaluru, Kolkata, Chennai and Hyderabad alone account for 46% of the top-100’s total spending.
On average income, Chandigarh and Bengaluru top the national chart, even as Chandigarh and Thiruvananthapuram lead on average household expenditure. Apart from the oft-quoted north-south, east-west and rural-urban divides, we now seem to have an urban-urban divide.
Juxtapose this with the fact that less than 40% of all residents live in urban zones that are richer than rural areas, and India’s prosperity skew in favour of a handful of cities would look stark.
This is unfortunate. Rising standards of living must go hand-in-hand with greater equity if the economy’s emergence is to be sustained.
Although the causal relationship of economic development with urbanization—does the former lead the latter or the other way round—has not yet been conclusively established, the link between the two has long been accepted as one of the basic tenets of development economics.
Urbanization, it is said, catalyses economic and social change, which promotes innovation and progress, thanks to urban pools of skilled labour, capital and commerce. The proximity of people and employers lets them interact more efficiently than in dispersed settings, making them more productive.
They are able to trade with each other, compete, exchange information and share logistics. Bigger cities host demographic diversity, foster interactions and spur the spread of new ideas and techniques.
While digital enablers may slowly come to blunt their edge, megacities are best placed to benefit from a virtuous cycle of economic dynamism, higher incomes and better social infrastructure.
The World Bank estimates that more than 80% of global GDP is generated in cities. A dip-stick poll of advanced countries shows a strong link between economic prosperity and urban population. In Norway, Denmark, Sweden, Australia, Canada and the US, for instance, the urban proportion is about four-fifths; it ranges from Canada’s 81.6% to Denmark’s 88.1%.
However, urbanization is a mixed blessing. As pointed out in a 2024 paper, Re-thinking Urbanisation and Economic Development by Ivan Turok of London-based International Institute for Environment and Development, the positive effects of the phenomenon are offset by rising congestion and higher costs of land and housing, which overburden low-income groups and worsen unequal access to jobs and amenities. We have already seen this in the rise of urban slums and lack of basic civic amenities in our cities.
Even if digital networks and tools begin to disperse value generation away from major urban hubs, India might see urbanization accelerate over the next decade or two.
But as the PRICE-Tata report shows, its pace is far from uniform across the country, with the well-off clustered at the top of our urban landscape. For all-round progress, the benefits of urbanization need to be shared more equitably.