India Banao!

The new national government has promised to remove all slums from urban India within five years. A worthy goal perhaps, but it will be no easy task. Simply relocating existing slum-dwellers will have little long-term impact – we have tried it many times before. A sustained drive against illegal encroachments and the rigorous enforcement of property rights, although necessary, will also not be sufficient to solve the problem. We need to understand why ever-growing millions of people move to these slums and are willing to live in such wretched conditions. Indeed, we need to understand the very process that drives urbanization.

India: The reluctant urbanizer

With the urbanization of China, more than half the world’s population lives in cities/towns. This leaves India as one of the last overwhelmingly rural societies on earth with almost 70% of the population still living in villages. However, as China has shown, economic growth could change this very quickly. When China began to reform its economy in 1978, it had an urbanization rate of barely 18% (roughly equivalent to India in 1950). Thirty years later, the proportion is estimated at around 55%! We have every reason to believe that we will experience something similar in the next three decades and that we will be an urban majority country by 2040.

This raises the problem of accommodating another 350-400 million people in our cities. Indian cities already struggle to serve the existing urban population – how will they deal with this deluge?

The standard response of Indian academics, politicians and officials to this question is that urbanization is somehow bad and that we must try to slow it. Greater investment and subsidies for agriculture is seen as a way to keep people rooted to their villages. This is absurd. Higher investment in agriculture may be necessary but it is not a meaningful response to urbanization. Farming may employ 45% of the workforce but it accounts for only 16.5% of GDP – it is simply not big enough. Economic development, in essence, is about shifting people from subsistence farming to other activities. Urbanization is the spatial manifestation of this shift. This is why virtually all developed societies are urbanized. We should not fight but encourage this phenomenon.

Changing the paradigm

The common image of urbanization is that of a poor peasant moving to a big city in search of work and eventually finding a space in a slum. This is a reasonable representation of what is actually happening – the migration of poor labourers from Bihar, Bengal and Eastern UP to Mumbai and Delhi. What is interesting about this phenomenon is that the migration largely bypasses the intermediate towns – peasants from rural Bihar/UP do not first migrate to Gorakhpur, Etah or Jaunpur. Why?

A major factor behind this phenomenon is the decline of small “moufassil” towns as centers of economic, intellectual and social activity in the post-independence era. Before 1947, many of the small towns were capitals of small principalities and princely states. Towns like Aligarh and Allahabad were sustained by their famous universities. With independence, the logic of the centrally-planned socialist model meant that power was concentrated in New Delhi and in the capitals of the larger states. The general deterioration of governance and municipal services, especially in Northern and Eastern India, also discouraged innovation and new investments in small towns. As a result, the middle-class of moufassil India simply migrated to the big cities. There are exceptions to this phenomenon – for instance, Gujarat – but it is true of much of India.
On one hand, the de-clustering of social and intellectual capital pushed the small towns into a downward spiral. Today, it is very rare for a well-educated youth to stay on in a moufassil town unless tied down by a family business. On the other hand, the concentration of human capital to the mega-cities triggered economic opportunities for everyone. Even the poor rural peasants of Bihar understand this, and they have flocked to the big cities to work as drivers, security-guards and construction-workers. It is this process that is driving the growth of slums.

So what should be done?

Almost 40% of India’s urban population lives in cities of over 1 million. Those living in cities with over 10million account for 15% (the urban agglomeration around Mumbai alone is said to 19 million). The comparable ratio for China is barely 5%. The reason for this is that China has invested heavily in providing small clusters of urban amenities and economic infrastructure. Of course, the government’s ability to maintain social control has also helped but, given the explosive pace of urbanization, this is still an extraordinary feat.

The Indian government may lack the levers of social control available to the Chinese. However, there are many other ways in which we can revive the small towns as well as urbanize the larger villages. For instance, we need to put much greater emphasis on providing better civic and municipal amenities in the district/block headquarters. Even in overwhelmingly rural areas, the greater good may be achieved by focusing energies on creating “urban” clusters that attract human capital and investment rather than in perpetuating the traditional “rural” economy. As people shift from subsistence farming to other professions, they will not necessarily have to migrate to Mumbai or Delhi. Instead they can take advantage of the opportunities of the nearby town (perhaps even as they continue to live in their ancestral village).

Importance of human capital clusters

As the reader may have guessed, an important aspect of this model is to maintain a minimum cluster of middle-class in the small towns. This is essential for seeding and sustaining economic dynamism. Simply investing in municipal hardware will not yield results. We need to think about the social incentives that brings together good quality human capital. Education institutions, for instance, can play this role. Universities have played a big role in driving small town economies in the West. In India too, Allahabad and Aligarh were once successful university towns. Unfortunately, the IITs in Kanpur and Kharagpur play no role in their host towns. They are deliberate walled-off. They now need to be seen as engines of urban re-generation.

To conclude, development will cause urbanization whether we like it or not. Therefore, we need to find ways to accommodate this phenomenon. The large mega-cities today face the brunt of rural-urban migration. We need to revive small towns, build new ones and urbanize the villages. The people are voting with their feet. If we ignore it, we will just get more slums.

This article appeared in Business Standard on 12th June, 2009

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