City city, bang bang: Revamping city boundaries will reveal true growth, aid economies and enable smarter planning

Economic Times

26-05-2025

Urban legend NITI Aayog is preparing a framework for reviewing city boundaries, considering economic indicators and land use as the key redefinition criteria. This is welcome. Our definition of urbanisation is conservative, based on a combination of 'and criteria', including a minimum population of 5,000, a population density of 400 persons per sq km of land area, and 75% male main non-agricultural employment.
The US, Britain and Australia define their urban areas based on population: Australia (1,000 inhabitants or more), Britain (1,000+ inhabitants) and the US (2,500+ inhabitants). Asian countries, including Japan and Malaysia, and African countries such as Zimbabwe, define urbanisation based on employment in non-farm pursuits, the criteria of which range in these countries from 50% to 60%, in addition to population. So, 75% non-agricultural employment of males, in addition to population and population density as criteria, is restrictive. In post-Independence India, which was agricultural, such a definition made sense. But not in Viksit India.
A study - Reclassifying Urban Areas in India: An Analysis of 2011 - published in Area Development and Policy (ADP) in 2020, performed simulations of what would happen to 6,40,947 villages in 2011 if more relaxed criteria were applied for defining urbanisation. Several alternative scenarios were examined for studying scenarios relating to changes in the criteria relating to the share of the population engaged in non- agricultural pursuits, the inclusion of female alongside male employment in calculating the share of non-agricultural employment, and the use of one of the three criteria (rather than together, as is currently done). Under the most relaxed definition - counting any village with a population density of at least 400 persons per sq km as urban - the study found that India would be 69% urban if all states were included. This is consistent with Economic Survey of 2017, which, using satellite data from Global Human Settlement Layer (GHSL), found that India was 63% urban in 2015, more than double the urbanisation rate estimated by Census 2011.When all male (instead of only full-time male employment, as currently considered) and female non-agricultural employment greater than or equal to 75% was considered as the only criterion for defining urbanisation in the ADP study, it was found that half of India would have been urban as of 2011. If only a population greater than or equal to 5,000 were the sole criterion, 51% of India would have been urban.
There is a steep and positive relationship between urbanisation and per-capita income, the evidence being that few countries have attained a per-capita income of $10,000 without at least becoming 60% urban. But our per-capita income is way below $10,000, which demonstrates systemic inefficiencies in urban infrastructure in unleashing the economic output of cities. So, it is important to identify their economic specialisation and target infrastructure towards those areas. Rightly, NITI Aayog is envisaging policies to promote industry and services, and lay emphasis on new growth avenues, including tourism, real estate and healthcare. A study - Economic Change and Specialisation in India's Cities in Review of Urban and Regional Development Policy in 2017 - used standard and well-known techniques, such as location quotients (LQ) and shift share analyses, to understand the economic specialisation of cities. It found that on average, over 1991-2001, cities' specialisation in all sectors, except for trade, decreased.On average, over 1991-2001, Indian cities' specialisation in manufacturing, whether household-based or non- household, decreased, which was seen in the decreasing value of the average LQ for these sectors when either the state or all of India was taken as reference. Further, there was evidence of persistence in the sectoral specialisation of cities (1991-2001).One way to understand if cities with a certain core advantage had retained the same specialisation a decade later was to examine correlations between LQs in 1991 and 2001 for every sector, using both the state and all-India as reference regions separately. These correlations were all strong and positive, with the highest correlations for trade and commerce (with the state as the reference region) and household-based manufacturing and fishing (when all of India is taken as the reference region).This shows that specialisation advantages have persisted over time in cities in most sectors. Further, in all non-agricultural economic sectors, cities in backward states were specialised in most sectors, even though no single city retained its specialisation during the 1991-2001 decade in any sector. It was found that financial intermediation, real estate, renting and business services had the highest LQ of all sectors in most of the selected cities, except for Delhi.So, there are two suggestions: We must understand our urbanisation rate locally with servers based in our own country. We should have our satellite datasets for determining urbanisation, which would be more authentic, as our municipal boundaries can be used. That would be Viksit India's definition of urbanisation.
We should nurture cities' areas of economic specialisation based on the use of standard analytical tools and techniques available to understand the same, and it would help greatly if Census 2021 can publish the data soon. (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.) Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Jolt to Çelebi could turn a big gain for this Indian firm that once had deep Turkish ties
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