Migration helps, but not too much

India’s urbanisation has been quite low, compared with its peers. It increased sluggishly from 17.29 per cent in 1951 to 27.76 per cent in 2001 and 31.16 per cent in 2011. However, the rate of growth of urban population has been quite high. And this tends to create significant pressure on infrastructure. The number of cities and towns has also gone up considerably over the years, particularly over the past decade: from 5,161 in 2001 to 7,935 in 2011.

Urban population expands due to three factors: natural growth, rural-to-urban migration, and reclassification of rural areas as urban. With a significant fall in the mortality rate, the natural growth of urban population has been high, raising the long run supply of labour substantially.

During 1991-2001, natural growth (as against migration) played a major role in stepping up urban growth, though, over time, this has shown signs of decline. Around one-fifth of the urban population growth is accounted for by rural to urban net migration.

There was a continuous rise in the contribution of net migration to total urban growth since the 1960s though between 1991 and 2001 there has been a slight decline in the rate compared to the previous decade.

The 2011 Census shows urbanisation has increased faster than expected. Also, for the first time since independence, the absolute increase in the urban population was higher than that in the rural population. The contribution of net rural-urban classification and rural-to-urban migration has increased from a little above 40 per cent during 1991-01 to 56 per cent during 2001-11 (available data from the 2011 Census at the moment do not allow for the separation of these two factors).

Some estimates suggest that the contribution of rural-urban net migration to urban growth is around 22.2 per cent. Also, we see the emergence of a large number of new towns in 2011. Given the larger contribution made by the reclassification of areas during 200111 compared to the previous one, 1991-2001, it may be safe to infer that net migration has at least not declined, if not increased.

It is usually believed that due to a large component of urban growth resulting from natural increase, the contribution made by the rural-to-urban migration flow tends to get suppressed. Even if we account for this fact, rural-to-urban migration rates in India are still low. Nearly 50 per cent of the workforce is still engaged in agriculture though the value-added share of this sector has subsided to almost one-fifth or so.

Rural-to-urban migration in India is not exceptionally high if we consider the aggregate rates to all-urban areas. However, when it comes to large cities, the rates tend to be higher. Higher the level of urbanisation, the greater the decline in the unemployment rate after migration.

States with higher urbanisation levels reveal larger increase in regular wage employment after migration. The share of regular wage employment is highest in the million plus cities and the least in smaller cities whereas the casual employment and self-employment follow just the opposite pattern.

Migration, urban informal sector employment, the incidence of Scheduled Caste population in urban and rural areas are all positively associated, suggesting that the socially backward groups are more likely to migrate and land up in the urban informal sector.

This pattern is accompanied by a decline in the incidence of poverty in the rural and urban areas: even the urban informal sector activities are able to provide somewhat better job opportunities and higher living standards. On the whole, urbanisation and migration show beneficial effects in terms of reduction in rural and urban poverty, as labour market outcomes tend to improve. This process is, however, not strongly evident. In order to strengthen the beneficial effects of urbanisation more policy interventions are required.

People from States such as Bihar show very high propensity to migrate. Rural areas of Bihar are characterised by unequal land distribution, high levels of inequality, gross underemployment and lack of productive livelihood opportunities.

Also, the caste factor plays a crucial role in reducing the accessibility to productive occupations. The rural non-farm sector is not developed to provide productive employment opportunities to those who do not have adequate land or are practically landless.

Agrarian contracts, land mortgaging, outstanding loans in the rural credit market force many of the rural residents to move in search of jobs.

Since the rural-urban continuum does not exist on a large scale in India (except a few states such as Maharashtra) people cannot afford to commute on daily basis from their rural home to urban work places. Also, small towns in the periphery of the rural areas are usually stagnant. All this implies that they have to migrate to faraway places in search of a livelihood.

Migration takes place through informal networks. The rural based job search in the urban labour market is quite prevalent. Though these networks are instrumental in providing access to urban job market and in forming strategies for livelihood seeking, they often result in labour market segmentation due to information asymmetry.

Thus, the scope to experience upward mobility is highly limited. Most of the migrants end up working in the urban informal sector, and even after spending their entire lifetime, they are not able to gain any significant increase in real income. The possibility of graduating to the formal sector is rather dim.

However, the silver lining is that many of the urban informal sector jobs offer higher wages than the rural sector. The MNREGA wages are attractive but jobs under these schemes are available only for a limited number of days. The urban informal sector offers a wide range of jobs to rural migrants, starting from construction and transport to petty trade and services. However, jobs within the informal sector vary widely in terms of wages, hence, one may find a multi-modal wage distribution within the urban informal sector. Horrifying stories of labour exploitation are innumerable.

Labour market contractualisation has gone up significantly in India. Labour intermediaries travel to rural labour catchment areas and initiate the migration process to faraway places, both rural and urban. While in a sense this process tends to reduce the demand-supply mismatches geographically, the gains to the workers are actually limited, as the intermediary fee is very high.

The return to migration is rather limited and many migrants continue to remain in and around poverty even after undertaking the costs of physical mobility.

The writer is a professor at the Institute of Economic Growth