As per the last Census held in 2011, more than 30 per cent of India's population lives in urban areas and the number is expected to swell to 50 per cent by 2050. There is an urgent need for a more equitable urban development approach that fosters inclusive growth and sustainable urbanisation by focusing more on smaller cities and towns.

During elections, political leaders often emphasise issues specific to big cities such as Delhi, Mumbai and Bengaluru, or the state capitals. Earlier, the Secretariat has highlighted how the structural biases within major infrastructure missions like Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and Smart Cities Mission (SCM) disproportionately favour larger cities, attracting more capital and workforce.

The selection criteria often prioritise aspects such as 'capacity to plan,' 'raise and manage funds,' and 'completion of earlier projects,' areas where larger cities usually excel compared to their smaller counterparts. That said, there remains a compelling case to recognise the significance and design potential pathways for the development of small cities and towns within India's urbanisation trajectory.

Small Towns Matter

Seventy per cent of future employment is likely to originate in the cities, particularly driven by emerging cities with populations less than 1 million, which are poised to fuel consumption expenditure.

Also, as 70 per cent of India's built environment for 2030 remains undeveloped, the forthcoming urban transformation presents substantial opportunities for both domestic and international investments in the country's urban infrastructure and development projects.

In a June 2023 report, consulting firm EY highlighted the untapped potential of small towns, predicting a significant boost to India's economy. Improved infrastructure, favourable government policies, and a skilled workforce in Tier 2 cities could drive the growth, currently at 11 per cent between 2019 to 2023, to at least 14 per cent between 2023 and 2030, marking a 3 percentage point increase, the report said.

The report highlighted Tier-II cities such as Visakhapatnam, Jaipur, Vadodara, and Kochi as emerging hotspots for new Global Capability Centres (GCC) due to improving infrastructure, favourable state policies, and lower real estate and talent costs. 

Coimbatore is singled out as the next big GCC hub after Chennai in Tamil Nadu, with projections of up to 115 new set-ups annually by 2030, signifying a significant shift in the geographical landscape of GCC investments.

India's smaller towns possess the ingredients for substantial urban growth, including a low cost of living, a skilled workforce, untapped market potential, government subsidies, and reduced competition.

However, the lack of adequate infrastructure hinders their development. Urgent action is needed through comprehensive infrastructure missions and policies.

A concerning statistic reveals that 76 per cent of census towns and 56 per cent of statutory towns lack master plans. Moreover, in Class I cities with populations exceeding 1 million, there is a treatment capacity gap of approximately 67 per cent.

The situation is even worse in Class II towns, with treatment capacity gaps reaching as high as 95 per cent despite their significant growth rates. These deficiencies extend to other infrastructure services, highlighting the pressing need for remedial measures.

Redefine, Recognise And Invest

Small towns, often categorised as Census Towns (CT) and overlooked by the Government of India as urban areas, are abundant in number; the recognition of new census towns stands at about 50 per cent.

Governed largely by gram panchayats (village councils), many of these small towns remain underserved by current urban policies, which predominantly favour large cities and contend that India's top-heavy urban system hampers the equitable regional development of the nation.

The challenge of categorising census towns poses significant hurdles in urban planning, as revealed by the New Delhi-based Centre for Policy Researh in a 2018 study.

Despite meeting the population threshold of 5,000 and the occupational requirement of 75 per cent male engagement in non-agricultural activities, many settlements were overlooked, failing to be categorised as urban areas. This discrepancy, where only half of the eligible census towns were included nationwide, has profound regional implications for the next decade.

Moreover, without proper master planning, which often hinges on urban recognition, the impact extends over 20 years, the typical timeframe for full master plan implementation.  emphasised that immediate action is necessary to integrate these towns into urban governance.

While newly added census towns have collectively contributed 7 per cent to urbanisation, only 50 per cent of eligible census towns have been recognised, leaving the rest under panchayats, pointed out Anil Kumar Roy, senior associate professor at the Faculty of Planning of Ahmedabad-based CEPT University,

Roy argued that if the criteria for urban areas were relaxed, many more towns would become eligible, potentially exceeding the current recognition rate. He also questioned the complexity of the current definition of urban areas in India, which requires all three criteria of density, population, and occupational engagement to be met.

Relaxing these criteria could significantly alter India's urban landscape and make urbanisation more inclusive and comprehensive, Roy said.

Recognition and urban jurisdiction play pivotal roles in urban development planning and policy formulation. However, the selective nature of urban development policies, as observed in initiatives like the AMRUT 500 scheme and the PRASAD program for religious cities, raises concerns about regional equity and inclusivity.

Consequently, there's a risk of inadequate support for infrastructure development and economic growth in these areas, hindering efforts towards balanced urban growth across the country.

To address these challenges and promote inclusive development, it's imperative to ensure the convergence of all schemes at both the urban and regional levels, thereby addressing basic infrastructure needs and preventing deep regional disparities.

In essence, prioritising investments in services in smaller towns is crucial for leveraging India's demographic dividend and promoting balanced urban growth. The regions and sectors targeted for investment will profoundly impact whether India achieves balanced regional growth or faces skewed urban settlements with significant disparities.