Urbanization in India: Some Questions

By Anjum Altaf

There has been a radical shift in the global consensus on urbanization. Till very recently India shared the anti-urban bias of most developing countries – the conclusion of a major 2004 study was that “most problems should be easier to manage if urban population growth is slowed.” Now urbanization is in fashion and cities are being touted as engines of growth. A 2010 McKinsey report begins with the statement that ‘urbanization is critical to India’s development’ and the government has launched the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to support this vision.

India’s urban population is projected to increase from 340 million in 2008 to 590 million in 2030.  With this post I hope to initiate a discussion of some of the likely dimensions and implications of this increase.

Would cities really play a dynamic role in economic growth or would they become concentrations of poverty and of communal or class conflicts? The answer could depend largely on the public policy initiatives that accompany the change.

An important conceptual distinction, often overlooked, needs to be made between urbanization policy and city management (the focus of JNNURM). Urbanization policy should be concerned with the spatial distribution of population and the size distribution of urban places. It can be better characterized in terms of the desired destinations for rural migrants: should they be encouraged to move to small towns, medium-sized cities, or to large metropolises? The management of individual cities, on the other hand, should be considered independently of spatial policy.

The emerging global consensus on spatial policy considers size to be a major advantage if cities are managed well – Tokyo, New York and London are often held up as the models to emulate. The 2009 McKinsey report on urbanization in China recommends a concentrated spatial pattern centered round mega-cities. While this may be the right recommendation for China, I believe the generalization is flawed. In particular, I wish to argue that it is a mistake to think of urbanization as an independent phenomenon. On the contrary, it is a derivative phenomenon that follows from the distribution of employment because people move in response to opportunities for jobs. Thus there is, and needs to be, a very strong link between urbanization policy and industrial or economic policy. If they are not coordinated there can be a lot of misallocation of scarce resources. The combination of urbanization and economic policies gives rise to what can be termed the ‘economic geography’ of a country.

This can be easily recognized if one looks back on the distinctive economic geographies of pre-industrial, industrial, and post-industrial economies. This has also been very starkly obvious in the case of China where the government has proactively managed the economic geography of the country both because of its control on the location of jobs via state-owned enterprises and on the movement of people via the mechanism of an internal passport system. Thus, when its industrial policy was to promote town and village enterprises, it supported the rapid growth of small towns while freezing movement to the big cities. Later, when the industrial policy shifted to manufacture for the global market, the urbanization policy also changed to permit migration to the large cities on the eastern coast as well to create new large cities from scratch. Shenzen epitomizes the latter phenomenon: it has grown from a fishing village at the end of the 1970s to a city of 14 million today of whom 70% are migrants without a formal status of urban residents.

This should convince us that the prime driver of urbanization policy in China is industrial policy, i.e., the determination of what kind of jobs are to be created and where they are to be best located? However, a little further reflection should lead to the realization that industrial policy itself is not a completely open choice – it needs to take into account global conditions, comparative advantage, the nature of the domestic market, and the characteristics of the human and physical capital that is available at any given time.

The joint policy choices that need to be made keeping in view all these factors can be quite complex and need integrated analysis and planning. There is need at this time in India to begin proactively discussing issues of economic geography. This would integrate urban and industrial policies and highlight the relationships that need to exist between different sized cities in the Indian context. It would thereby also provide a basis for the optimal allocation of resources to different size-categories of cities. It is quite possible that city-size alone might not be the best measure of priority as it presently is in the JNNURM with its bias towards the bigger cities.

We know that India, unlike China, does not have a state-directed urbanization policy although earlier attempts to slow urban growth could be considered a variant. The spatial policy is one of laissez faire with rural-urban migration being channeled via market signals and forces. The estimate that between 75 to 80 percent of the urban population will reside in Class I cities by 2030 is one that is based on the projection of existing trends assuming that the laissez faire regime remains unchanged.

A market-led urbanization policy is the accepted norm in developed countries and one that is recommended in theory. However, we should not fall in the trap of making a fetish of markets. It is often the case in developing countries that the markets that exist are incomplete or legacies of past colonial regimes whose objectives might have been at odds with those of present governments. For example, it made economic sense for colonial governments to develop the major ports and the links to them in order to facilitate interactions with the mother country. This rationale may or may not remain important for an independent country. If the rationale changes, new markets and market connections often have to be created by strategic allocations of public sector investments. These can alter the subsequent patterns of the movement of financial and human capital. As an example, the government in China created new markets where none existed first via the Town and Village Enterprise policy and then by the massive investments in the Special Economic Zones on the east coast.

It is clear that urbanization policy in India is not explicitly integrated at present into the national economic policy to enhance the effectiveness of the latter. A debate is needed on what kind of urbanization pattern would be optimal for India given the economic orientation it chooses for driving future growth. Based on the policy of choice, measures and incentives could be put in place to shape the spatial pattern of population distribution and the size-distribution of urban places. This need not be through direct control over the movement of people. Rather, it should be the outcome of purposefully determined and spatially strategic public investments.

This is not the place to prescribe the economic orientation that would be best for India at this time of global recession. However, it should be obvious that a decision about urbanization policy in the absence of consensus on economic orientation would be premature. An investment in thinking through some essential characteristics of the Indian situation would be rewarding and should yield some pointers towards feasible scenarios for the future. Here I wish to list a few considerations as starting points for a discussion of feasible alternatives for the economic geography of India:

1.     Unlike China and the US, the majority of the Indian population resides inland and not along the coasts. What are the implications of this demographic difference?

2.     Almost half of India’s rural population is illiterate and unfamiliar with industrial work making its transition to an urban lifestyle relatively more difficult. Does this imply that a staged pattern migration might be a preferred route to consider?

3.     Raising the productivity of rural labor (including its health status) would require major investments if returns to urbanization are to be realized. Should these investments be made pre- or post-migration?

4.     India’s fastest growing industries have low employment potential within the formal labor market and especially low employment potential for illiterate and unskilled workers. Rural migrants will find it very hard to find a niche in demanding urban job markets. What are the implications for the spatial distribution of population?

5.      The scarcity of land in Indian cities would push low-value activities and poor people to the peripheries. Environmental concerns would reinforce these trends. Should this suggest a proactive policy promoting satellite towns?

6.     Agglomeration economies in cities depend on infrastructure investments that integrate labor markets – primarily rapid transit that links affordable housing and concentrated job centers. These investments in urban productivity have lagged in India where priority has been given to social welfare. Should existing major cities get such investments first or should cities with the most future potential get the prioirity?

7.     The politically dominant unit in India is the state and not the city – it is the Chief Ministers of states that rise in national politics not mayors of cities. It seems difficult to envisage changes that would reverse this hierarchy. What kind of mechanisms and incentives are needed to encourage states to leverage their cities more effectively?

8.     The electoral system and constituency boundaries create a bias towards non-urban voters especially because voters that can be influenced are preponderantly outside municipal boundaries. How can cities overcome this handicap?

9.     A growth-first strategy focused on cities would heighten already severe spatial inequalities. Would India’s democratic system allow enough time to postpone addressing these inequalities to the distant future, i.e., would a spatial version of the trickle-down policy be politically feasible? If not, what kind of urbanization policy would balance urban and rural interests?

10.  Cities in India are much more fractured along lines of religion, ethnicity and caste than their counterparts in East Asian countries. Would these fault lines survive the tensions that could be released by uneven growth and changes in demographic balances? If not, what measures would need to accompany accelerated migration to urban areas?

The aim in raising these issues is to get away from the facile generalization that there is some optimal urbanization policy that is equally applicable to all countries. An urbanization strategy focused on the undoubted economic potential of large cities would have to survive the many pitfalls that are unique to India’s political, economic, and social landscape. It is the contours of this landscape that should shape the urbanization policy that would be best for the development of India and for the prosperity and well-being of its people.


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