More Indians are moving into towns now. According to the 2011 Census, the urban population grew by 90.99 million between 2001 and 2011. The absolute increase in the rural population over this period was 90.47 million. Put differently, urban population grew by 31.8 per cent, a little over two-and-a-half times the corresponding decadal rise of 12.18 per cent for the rural population. The speeding up in the growth rate of urbanisation is marginal — 31.8 per cent, against 31.4 per cent over the previous period. In terms of States, Tamil Nadu leads, with 48.5 per cent of its population living in urban areas. (Kerala is at 47.72 per cent, Maharashtra at 45.23 per cent and Gujarat at 42.58 per cent.)
This is an inflexion point and it could become important in several ways. Some of these are a cause for concern; others for celebration. A major worry ought to be the fact that the number of net buyers of food in the country will be higher than the number of producers. This is bound to put upward pressure on food prices, if there is no improvement in agriculture productivity. Since that seems a distant prospect, in view of the fragmentation and sub-division of holdings, and since there is no move to amend the laws that govern property succession, India will soon have to import food on a scale similar to China. Very few countries experiencing rapid economic growth have been able to avoid this predicament. They have all been countries with favourable land-people ratios. On the positive side, however, is the fact that cities are excellent engines of growth. Economists don't agree much on what the drivers of growth are, but on one thing they do concur: urbanisation. The agglomeration factor brings down costs all around and this helps firms grow. Some may argue that while these benefits are mostly private, the costs of meeting urban infrastructure needs are public. While this may be true in an accounting sense, the overall economic benefits can hardly be gainsaid. There is also the benefit that accrues to the financial sector, which is able to tap into savings and make them available for investment much more easily. For over 40 years now India has been trying to take banking to the rural areas, with not much success. An increased rate of urbanisation will reduce the pressure on banks to go unprofitably into rural areas.
Higher urbanisation also has long-term consequences for governance. There will not only have to be an increase in the number of urban bodies, such as municipalities, the way in which they raise funds will also change. In sum, India is in for a new set of governance problems, both in terms of structures and in terms of systems and manpower, which it is currently ill-equipped to handle. That is why the latest numbers should serve as a heads-up to the Government.