Why India Needs Faster Urbanisation More Than Ever

We need not invent new technology to raise Indian wages to global standards. It is, of course, true that wages depend on technological advancement. But, India can make technology that exists all around the world accessible to everybody by making its cities attractive to foreigners and global firms. Modern technology can be made accessible to even the least-skilled workers by allowing rural Indians to migrate to such cities. To cut a long story short, India can raise its wages to global standards by being more urbanised. This is already happening. According to the World Bank, by 2050, 75 per cent of India's 1.6-billion population would be urbanised. member: In contrast, according to the World Health Organization (WHO), merely 70 per cent of world population would live in urban areas by 2050.

The urbanisation process in India has been very slow for much of the history. But, today, urbanisation in India is faster than in most parts of the world. India is likely to witness the highest surge in urbanisation in the next few decades, even greater than China's. When more people live close to each other in urban areas, there will be greater trade, production and foreign investment. No economist doubts that India needs greater urbanisation, at a much faster pace. But, for this to happen, policies in cities like Mumbai, Bengaluru and Delhi should improve. If the policies in cities like Mumbai or Bengaluru do not attract global firms, they will take their businesses elsewhere. India needs gateway cities.

Infographics by Sandeep Bhatnagar

Harvard economist Edward Glaeser observes that in countries that are more than 50 per cent urbanised, income levels are five times higher, and infant mortality less than a third when compared to countries that are less than 50 per cent urbanised. Unfortunately, in urbanisation, India is way below world average. The least prosperous metros are in India, China, Brazil and South Africa. However, these metropolises are growing much faster than the metros in the developed world. In the Europe and North America, growth of large cities is much slower. The ratio of productivity in urban areas to productivity in other parts of the country is the highest in emerging economies. In , it is 1.6 and in Delhi, it is 2.6. But, many cities in China have an urban productivity ratio or four or more. This is true of many cities in Brazil and Philippines, too. By being more urbanised, India can raise its income many fold, curtail infant mortality, and perform better in every development indicator. If a country like Brazil can be in the upper quintile of the distribution, India can, too. By denying itself gateway cities, India is not unlocking its true potential.

Infographics by Sandeep Bhatnagar

Urbanised countries provide adequate water, electricity and sanitation facilities to its people. Many of India's cities do not have access to piped water supply and in most cities, which have access to piped water, water supply is erratic. Power failure lead to two per cent decline in the value of sales of the services industry. It is commonly assumed that with urbanisation, such challenges would intensify. But, this has nothing to do with an inherent shortage of resources. Meghalaya has the highest rainfall in the world, but the state struggles to provide water to its people. The problem is systemic. Central and state authorities are not able to meet the needs of its people, though the contribution of cities like Gurgaon and Mumbai to the economy is incomparably greater than the funds they receive for infrastructure development. By providing better sanitation, electricity and water supply to its cities, the Indian government can attract much greater investment and skilled labour from across the world. But, this works both ways. If the government makes it easier to start and run a business, multi-national corporations will invest in Indian cities. Greater foreign investment would generate funds to provide superior infrastructure and utilities to residents. 

Infographics by Sandeep Bhatnagar

Well-developed transportation networks are essential for the cities to grow and flourish. This should have been obvious, because cities are all about proximity between people. Cities are more productive than rural areas because people live closer to each other and trade with each other. As there is greater trade, greater interaction, and a large consumer base in the cities, advantages from economies of scale are much greater. Deep transportation networks facilitate trade and allow people to fully utilise advantages from proximity, by cutting down commuting time and cost.

Only a handful of Indian cities have mass transit, like a metro system. Nearly a quarter of Indian cities with a population more than half a million have a city bus system. Even Indian roads are extremely congested in the cities, where the cost road congestion imposes is great. This should not be the case, because population density is very high in India. High density of population makes India well-suited for mass transit. Moreover, income levels are extremely low in India, by global standards. Labour markets in India would not function efficiently without mass transit networks that allow people to access labour markets at a lower cost.

Infographics by Sandeep Bhatnagar

The surfaced-road length in India grew roughly 12 fold in a six decade period in which the number of vehicles on Indian roads grew nearly 473 fold. This is not because India is a developing country but because other developing countries have public transport rates that are double of that of India. Regulatory and tax norms in India are skewed against public transport. The Indian government did not invest enough in transportation networks, even when compared to countries of comparable income levels.  Even though almost all roads in India are either not surfaced or poorly constructed, nearly 40 per cent of India's traffic runs on national highways. This is a major cause of traffic congestion, and sub-optimal utilization of real estate in India. This deters multi-national corporations from investing in India, and hinders migration from rural areas to cities. 

Infographics by Sandeep Bhatnagar

But, despite all this, Indian cities offer much better living standards than rural areas. It may be fashionable to say that a significant fraction of India's urban population lives in slums. They live in slums because property in India is highly expensive when compared to income levels. But, when compared to their rural counterparts, people who live in slums have much better amenities. According to a 2012 Census Commissioner's report, 47 per cent of the rural households have a TV, while as many as 70 per cent of the slum households have a TV. 66 per cent of the slum households have toilets when merely 30.7 per cent of rural households have toilets. Over 90 per cent of the slum households have electricity while less than half of rural households have access to power supply. Even when you compare slum households to other urban households, the amenities they enjoy are comparable. With all its flaws, India's urban areas are incomparably better than its villages.