In this paper, we discuss the political economy of the definitions of urban and rural in India. When using alternative definitions of urban, we find that India is much more urban than is officially recognized. Given that a number of development programmes in India are targeted to rural areas, it is likely that there are incentives to underestimate the extent of urbanization. Using the currently used administrative definition and alternative definitions, we investigate the efficacy of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), a demand-driven scheme targeted to rural areas. We find that alternative definitions relate better with MGNREGS use than the currently used administrative definition does. When examining whether MGNREGS use is greater in districts where urban population and settlements are underestimated using the current definition as compared to alternative definitions to a greater extent, we do not find evidence of more use in districts that underestimate urban to a greater extent. However, there are inefficiencies in the form of higher unmet demand and lower utilization of predicted persondays of work using the administrative definition. Hence, we argue that the current administrative definition of urban does not capture the true character of places and present a case for exploring alternative criteria for defining urban in India.