India's urbanization fizzling out?

Mon, 21 Apr Pre-Open

   Previous Close   

   09:30 am   

   11:30 am   

   01:30 pm   

   Closing   

Few years back, if one wanted to 'make it big' in life in India, the most lucrative option was to move to its fastest growing metro cities. After all, these were the places which bore the maximum fruits of India's stupendous 9% plus GDP growth. Unfortunately, the growth wave busted too soon as India's GDP slumped to 4% plus. This reversed fortunes of millions of people as the downturn literally forced them to pack their bags and return to their old ways of lives.

An article in WSJ India throws light on what has gone wrong with India's urbanization wave in the last few years. Rising inflation, slow pace of industrialization and lack of job opportunities in industrial and service sectors are to be blamed. These factors particularly staggering inflation rarely allow migrant workers particularly in blue collared jobs to move ahead of their expenses.

Credit-rating firm Crisil states that when India's industrial and service sectors were booming, agriculture employment had shrunk by 37 m jobs. However, it asserts that lack of job opportunities outside agriculture, in urban areas as well, will lead to a u-turn in the process and by 2019, additional 12 m people are expected to return to agriculture . India was touted as the next big information technology hub but it has failed to grow out of its dependence on agriculture for employment. Agriculture accounts for just a fifth of GDP, but half of employment. A weak manufacturing sector as compared to its other Asian counterparts has hampered India's growth. There are thousands of barriers in the form of power supply, restrictive labor laws and poor infrastructure that the country's businesses face today.

In terms of urbanization too, India has not kept pace with China. As per the World Bank, in 1990, the share of Indian population living in cities was same as China's i.e.25%. In 2012, it was 32% in India; while China's urban population has crossed 50%. India's metro cities are not so well planned so as to accommodate increasing population. There are many hardships that the migrants face in cities in the form of lack of infrastructure, higher rent and property prices due to lack of space. These factors certainly take a toll on quality of life in cities and encourage people to move back to villages. In addition, government's perks to poor in rural India in the form of various employment programs have slowed down the process of migration to cities.

Consequently, cities are left with very few and insignificant incentives to rural people. However, we believe rural and urban sectors of India's economy overlap each other economically, financially, and socially. If India really aims for a sustainable urbanization, first of all it has to deal with its urban bias. This means to ensure an even growth in both rural and urban areas. This includes efficient transfer of resources and labor surpluses from rural to urban areas; which shall ensure better income distribution. If rural areas are well developed with high standard of living; the number of migrants will decline. This will definitely take some burden off from our over populated and 'exhausted' cities and improve quality of life of people living in cities.