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Insights into Editorial: Recognizing urban India

Insights into Editorial: Recognizing urban India

07 July 2016

The ministry of urban development recently directed state governments to convert census towns to urban local bodies to allow for planned development and efficient service provision.

What are census towns?

Census towns are areas that are governed by village panchayats but are recognized by the census of India as being urban. According to the 2011 census, there are 3,894 census towns in India spread across states.


Urbanization has an important role to play in a country’s economic growth and so it is critical to get it right. However, the extent of urbanization in India is still widely underestimated. This underestimation has led to a host of problems—from misallocation of resources to unsafe development of densely populated clusters.

Why it is difficult to convert census towns to urban local bodies?

The ultimate decision to convert census towns to statutory urban local bodies rests with state governments. Municipal laws in some states specify guidelines such as population and density thresholds for notifying areas as urban local bodies, but these guidelines vary widely.

  • For instance, Tamil Nadu and Maharashtra have population thresholds of 30,000 and 25,000, respectively, for classifying an area as urban, whereas states such as Kerala and Punjab have no such criteria.
  • Also, these guidelines are not binding and state governments can exercise discretion in notifying areas.

Why it is necessary to convert census towns to urban bodies?

  • In India, at the state level, the extent of areas governed as urban has a weak relationship with income, poverty and population working in non-agricultural activities, all of which are thought to be correlates of urbanization.
  • Having differing and flexible guidelines makes sense given the heterogeneity across states. But differing guidelines are only meaningful if they are able to capture the true urban and rural characteristics of places across states. But this is not the case in India. Hence, to bring in uniformity it is necessary to convert census towns to urban local bodies.

Extent of urbanization in India:

According to an IDFC Institute paper, only 26% of India is governed by urban local bodies as of 2011. The rate varies across states with small hill states such as Mizoram (37%), Nagaland (26%) and Manipur (25%) surprisingly having a higher percentage of its population governed as urban than larger states such as West Bengal (23%), Bihar (11%) and Kerala (16%).

According to the census definition, India is 31% urban. But if Ghana’s definition of urban is applied, India is 47% urban, and if Mexico’s definition is applied, India is 65% urban. The differences in urbanization rates are even starker at a subnational level. For instance, Kerala is an anomaly and goes from being around 16% urban as per the administrative definition to over 99% urban using Ghana’s and Mexico’s definitions.

Way ahead:

This desire to stay rural may stem out of perceived advantages that are enjoyed by rural areas, such as access to funding through rural development schemes or lower taxes. However, these advantages may not necessarily exist. In fact, according to few recent studies, areas that are urban in nature but governed by panchayats make disproportionately more use of the Mahatma Gandhi National Rural Employment Guarantee Scheme. Thus, while staying rural may not confer the benefits some imagine they will receive, the real losers from the state governments’ actions are the de facto urban areas that are deprived of the benefits of planned development and amenities and services provided to officially urban settlements.


India cannot afford to govern its settlements in such an arbitrary manner, and the ministry of urban development’s move is one in a series of many steps required to address the lacunae in the current rural-urban categorization system, prevent misallocation of resources, provide efficient services and governance structures, and leverage the ongoing structural transformation to boost economic development. India is more urban than we think. Finally, policymakers are coming round to reckoning with this reality.