A motorcycle drives past he NTPC Ltd. Badarpur coal-fired power plant outside Delhi, India. (Photographer: Kuni Takahashi/Bloomberg)

Budget 2017: A New Urban Model To Stop Premature Deindustrialisation

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  • The rates of growth in urban population in many Asian countries have slowed down significantly in recent decades. A few East Asian countries such as China have bucked this trend. The deceleration in urban growth in India is a significant contributor to this trend - from 3.8 percent annually in the 1970s to 3.1 percent in the 1990s and then to 2.7 percent in 2000s and the 2010s. The world turned 50 percent urban only in 2007 and not in 2005, as was predicted earlier. Reflecting this, the United Nations’ World Urbanisation Prospects report has repeatedly lowered its projected levels of urbanisation and urban growth in India and Asia.

    It is a matter of serious concern that many of the countries in Asia as well as in Africa are experiencing a process of urban contraction. They are also seeing premature deindustrialisation, a phenomenon empirically investigated by Harvard economist Dani Rodrik and others. These countries are showing no increase in industrial output, a stagnating workforce in manufacturing, and a low rate of urban growth. The trend has been attributed to the global and Eurozone economic crises. Notwithstanding this, the Asian Development Bank expects India to grow by 7-10 percent annually in real terms, led by the manufacturing and construction sector. There are disturbing trends which suggest that the ADB's predictions may not materialise.

    The share of organised manufacturing in terms of value added has declined over the past decade. Employment in manufacturing has stagnated for more than two decades now. There are speculations that India, too, may fall into the contraction trap.

    Moving Away From The Big Metros

    The paradigm of metropolis-based urban-industrial expansion envisions development in the developing world as responding passively to the compulsions of global capital and linkage to the global market. This has created an extremely top-heavy urban structure in India where the share of cities with a population more than 5 million is 23.5 percent compared to a global average of 17 percent and Europe at 7 percent. The global crisis seems to have destabilised the economic base of these cities and is responsible for slowing the overall pace of urbanisation in the country. This is adversely impacting the process of industrial development.

    Fortunately, this is not the only urban reality in India. The share of non-class-I cities - with population of less than 1 lakh - has gone down from 82 percent to 28 percent during the last century, as has the number of such cities. The process has nonetheless experienced a paradigm shift in recent years. The total number of towns in India has gone up by 2,774 in the first decade of the 21st century, against an average increase of less than 500 per decade in the last century.

    The number of ‘census towns’ that are not recognised as urban as per the government statute has gone up from 1,352 to 3,894 in the matter of a decade. This is unprecedented in the history of the Indian census.

    Almost all these settlements satisfy the demographic criteria of the census: population size, density, and non-agricultural workforce. They should have legitimately got urban status in 2011. Most of them met the criteria in 2001, and should have been declared as urban then.

    Counted By The Census, Ignored By Governments

    Since a relatively small number of these towns fall within a metro region or around industrial corridors, we can dismiss the hypothesis that urban dynamics are operating only under the shadow of metropolitan cities. A large section of the country’s urban population lives in census towns that are being governed by a rural administrative setup, as these have not been given the urban status by their respective state governments. The Registrar General of India, while collecting slum statistics from these towns (as supplementary work for 2001 census at the behest of the Ministry of Housing and Urban Poverty Alleviation), had held that many of these townships can be declared as slums due to their low level of infrastructure and basic amenities. Had there been an average increase in the number of census towns, the growth rate of urban population would have fallen below 2.5 percent per year in the last census decade.

    Infrastructure deficiencies in these towns could adversely affect their future growth, and the overall process of regional and urban development in the country.

    A New Urbanisation Model

    There is a need to build an alternate macroeconomic framework to promote the growth of small and medium towns. Such a framework needs to question the advocacy of a uniform system of governance as a solution to all urban problems.

    The growth of these towns is, in general, not linked to a neighbouring metropolis, and consequently, does not reflect dependency relations with global capital.

    Many of these towns have exhibited fairly high economic and demographic growth in recent years. They have done so despite not being a part of the metropolitan hierarchy, and with no major support from public agencies. Town-specific innovative arrangements, operationalised through social and financial institutions at the local level, are attracting investment in small-scale informal manufacturing, trade, and real estate establishments. There has been a nexus between exogenous and endogenous factors sustaining this process.

    Houses stand in the the village of Mangrauli, outside the city of Meerut, Uttar Pradesh, India. (Photographer: Prashanth Vishwanathan/Bloomberg)
    Houses stand in the the village of Mangrauli, outside the city of Meerut, Uttar Pradesh, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

    Regrettably, national governments and global development-banking agencies have paid scant attention to cultural, institutional and infrastructural factors, that are specific to these towns. There is a strong case for studying these and addressing the problems at a micro level to promote sustainable urbanisation. Although the economies of the small towns are currently localised, they can be linked to the regional economy through innovative intervention.

    Alternatives to the dominant paradigm of development do exist.

    Economic and demographic growth in such towns must be supported through specific interventions as big as the Jawaharlal Nehru National Urban Renewal Mission or the Smart Cities plan. If left to market forces, it would take decades to transform these towns. There is an urgent need to make them a part of India’s urban future.

    New Centres Of Consumption

    An analysis of the consumption of household durables and construction material, from the National Sample Survey data for the year 2011-12, reveals that only 35 percent is from metropolitan cities. Understandably, a strategy of industrialisation centred on metropolitan demand is likely to face serious hurdles in India, and in many other countries in the developing world. The strategy must focus also on the remaining 65 percent demand and consolidate it. Doing so can generate employment outside metropolitan cities for the growing labour force.

    The only way 7-10 percent annual GDP growth can be sustained in the coming 2-3 decades, is by supporting this alternate mode of urbanisation.

    The proposition advanced by several international agencies is that the success of globalisation and livelihood in a less developed country depends on the speed with which modern production, trading, and banking institutions in small towns can be linked to metro cities. After studying the data we just went through, the idea of injecting global values into the business behaviour of small towns must be taken with skepticism. Building a metropolis-centered institutional system with global technology and modern values for the success of capitalism - as attempted in some of the African and East Asian countries - can turn out to be not only expensive, but also counterproductive. It can result in premature deindustrialisation becoming a reality.

    An alternate strategy for balanced development in the country can be built through an understanding of the infrastructure and socio-political environment in small and medium towns. Understanding the development dynamics at a local level, attracting small scale investments and skilled workers from the hinterland, can go a long way in promoting sustainable industrial development. It is important to construct a new narrative outside the framework of metro-centric urbanisation, through an analysis of situations in the towns that are currently considered to have marginal importance.

    Amitabh Kundu is a senior fellow at the Delhi Policy Group, and a professor at the Institute for Human Development, New Delhi.

    The views expressed here are those of the author’s and do not necessarily represent the views of BloombergQuint or its editorial team.