THe Blog

June 03, 2016

The Problem with India's Urban-Rural Classification

In a recent article in the Indian Express, Bibek Debroy discussed some of the problems with the way urban and rural is defined in India and the implications these definitions have for public goods and service delivery. Debroy pointed to the fact that rural is a residual category, having no specific definition. In other words, all settlements and areas that are not explicitly classified as urban are considered rural.


However, there is no objective definition for urban either. Regardless of size, density, primary occupation of the working population, areas can be classified as urban and be governed by urban local bodies if state governments deem them to be so. To be sure, the various municipal acts that apply to states do have guidelines for defining which areas may be governed as urban, but they are often not adhered to. As a result, we have bizarre instances where settlements with population greater than 10,000 are defined as rural.


Failure to recognise already urban areas as such has resulted in the latest Census figures showing India to be only 31 percent urban. If we look at alternative ways to define urban, we get a starkly different picture. An IDFC working paper by Tandel, Hiranandani, and Kapoor finds that when using a population criterion of 5000, India is 47 percent urban. Using an Agglomeration Index developed by Uchida and Nelson, a 2016 World Bank report finds that India is around 56 percent urban. Recent work by Jana, Seddon, and Sami shows that India would be 55 percent urban if we applied a density criterion of 800 persons per square kilometer. In short, by alternative accounts India is already fairly urban. 


The underestimation of urbanisation in the country, coupled with a reliance on urban and rural categories for public goods and service delivery and for targetting government schemes has three major consequences: 1. Incorrect standards of services being applied and unmet requirements of local public goods in de facto urban areas; 2. Misallocation of funds in cases where developmental programmes and schemes designed for rural areas are utilised in de facto urban areas; 3. Failure of politicians to recognise that the electorate is no longer rural and agrarian but has the same aspirations as those in urban areas. 


What needs to be done to change the current situation? Changing the definition of urban and rural would be an obvious place to begin. But this may be politically difficult to do, especially if stakes for continuing to be classified as rural are high. Given the political constraints, we could start by adjusting the inquiry or at least be mindful of the flaws in the official definition while undertaking any empirical and policy research on urbanisation and its effects. In the medium term, we could reduce the stakes in urban-rural categorisation by having local public goods and service delivery standards set according to population and density thresholds and targeting developmental programmes based on objectively measurable criteria that are immune from obfuscation. 

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