Bridging the Local - Beyond the 73rd and 74th Amendment

Policy Challenges 2019-2024:
The Key Policy Questions for the New Government and Possible Pathways
Rapid urbanization; growing energy demands; environmental degradation; declining agricultural productivity; weak human capital; generating productive jobs; new security threats; and re-positioning India in a changing global order – the new government takes charge at an important policy juncture. This document is an effort to spark debate and ideas on how India can negotiate these challenges and build a cutting edge 21st century policy environment.
4 July 2019
Mukta Naik, Sama Khan, Shamindra Nath Roy

By Mukta Naik, Sama Khan and Shamindra Nath Roy[1]

Indian urbanisation is not just mega cities, it is as much in smaller towns, in villages on the urban peripheries, along corridors and in many other transforming spaces across the countryside. This continuum of urbanisation has to confront the binary of governance – where local government actions and central schemes are subject to an urban and rural dichotomy. States have the ability to transcend this schizophrenic approach and must be encouraged to do so. The Union too needs to redesign its central schemes to avoid exacerbating this divide.

Cities are seen as the key drivers of growth and managing urban expansion is a major policy challenge. But, Indian urbanisation is marked not just by expansion but also by the transformation of a large pool of rural areas (Pradhan, 2013). Together these two factors contributed about 40% of urban population growth between 2001 and 2011 census, with an equal contribution coming from natural growth, and the rest from migration.  India’s urbanisation is thus as much a story of its large megacities as it is a story of the in-situ transformation of its rural population, not just in the periphery of cities, but also beyond.

Indian urbanisation on the ground – a rurban story?

In India, very large cities co-exist with a dense network of small towns. The six major urban agglomerations – Delhi, Mumbai, Kolkata, Bangalore, Hyderabad and Chennai – constitute about 74 million inhabitants in 2011. They are followed by a series of secondary metropolitan areas, which are state capitals and other big cities, and all these million-plus cities constituted a little under a third – 31% – of the urban population in 2011[2]. Some are recent upstarts like Gurugram, but most have been around for some time, as medieval or colonial cities.

While the large cities are commonly regarded as growth engines, urban growth in the past decade is not concentrated in these but actually quite evenly distributed across various urban categories and locations. One-third of fastest growing cities are small towns – 40% of the urban population in 2011 lived in small towns of less than one hundred thousand – and their economic activities are confined to the development of specialized clusters involving cities of various size as well as villages (Swerts et al, 2018).

Not all these towns are administratively ‘urban’ or statutory towns (STs), but they are counted as urban by the census since they are above the demographic and economic threshold of being ‘urban.’[3] These settlements are known as census towns (CTs), and together with smaller STs, they bridge the gap between India’s large cities and rural area, as nodes that supply essential goods and services to the hinterland.

While the CTs are administrative villages that are counted as urban, there are many villages that do not cross the census threshold but show visible non-agricultural functions. Together, these new ‘rurban’ spaces are slowly becoming a vital part of India’s settlement hierarchies, and their importance is rising in terms of filling the spacing between the interconnected city systems. They provide two main kinds of crucial linkages between rural and urban, spatial and economic.

Spatial Periphery: While the peripheries of large cities like Delhi, Mumbai or Kolkata are growing at a faster rate than the core cities[4] (Sivaramakrishnan et al, 2005), population and built-up growth is happening around smaller cities as well, and across different geographical locations. For example, Mallappuram, which used to be a small municipality of ten thousand people in northern Kerala during census 2001, grew to an urban agglomeration of 1.7 million people by 2011. This growth came from census towns – administered by panchayats – around the city, which constitute 80% of the population of Mallappuram urban agglomeration in 2011.

Spatial Corridor: Rurban areas are also emerging along industrial corridors, combining cities of different sizes and villages between two distinct city clusters, to create an extended urban region. For example, many such settlements connected to textiles and light manufacturing stretch along NH 45, from Bangalore to Salem in southern India. Such spaces blur the inter-urban boundaries while facilitating integration of the rural with urban.

Economic: Economically, non-agricultural activities are spatially diffused, much of it outside the larger cities. In 2005, the share of the districts where largest 50 metropolitan areas are located was only 41% of the total non-farm value added in the country (Swerts et al, 2018). As per the latest Periodic Labour Force Survey (PLFS) 2017-18, about 45.8% of the manufacturing employment in India is rural.  In these rurban areas, the economic activity is not just non-farm but also agricultural, with returns from farm, and remittances being invested in services like transport and retail trade. Even in large cities, stringent land-use regulations and urban-density policies can push firms beyond the formal city boundaries. The pace of manufacturing employment growth was fastest (41%) over 1998-2005 in rural areas adjacent to largest metropolitan cities (Vishwanath et al, 2013).

In India, therefore, it may be more accurate to characterise this phenomenon as a rural-urban gradation (Chatterjee et al, 2015) not just in terms of economic indicators like non-farm activities but also in terms of other measures like built-up growth or nightlight intensity. These places are also not very different from smaller towns in terms of consumption levels or investment in private assets like septic tanks or motorized two-wheelers.[5] Neatly classifying such settlements as urban or rural biases our understanding of India’s structural transformation and its associated welfare outcomes (Chatterjee et al, 2015).

Dichotomous Governance

Yet, our administrative structure valiantly attempts to govern India’s settlements across clear administrative boundaries of rural and urban. The Constitutional framework of rural and urban governance, introduced by the 73rd and 74th Constitutional Amendment, gram panchayats in the case of villages and municipalities in the case of urban areas, reflects this dichotomy. This is historically evident at both state/local and union government level. Only the statutory towns are administrative urban areas, and are governed by an elected urban local body (ULB) constituted by the Article 243 P & Q of the Constitution, which varies across different sizes and scales like Municipal Corporations, Municipalities or Municipal Councils, and Nagar Panchayats or Transitional Urban areas. The criteria to designate (or declassify) a place as a ULB and categorizing them across different scales is a prerogative of the state governments. These criteria vary across states, from population cut-offs to workforce character, revenue generation capacity, etc. (Joshi et al, 2018).  What is recognised as an ULB in one state may not be so in another.

CTs and villages, which constitute the rural-urban gradation, are not designated as administratively urban by the state, and continue to be governed by the appropriate gram panchayat. However, socio-economic changes in these rapidly transforming spaces make them appear quite similar to formal urban areas in terms of economic activities, human capital and the nature of services required by the citizens.

This administrative classification also results in differences in functional domains and financial incentives to the rurban areas and smaller STs.  The 11th Schedule of the Constitution places important functions like agriculture, irrigation and housing under the ambit of Panchayats, while the 12th Schedule places urban planning, land use, water supply, roads, bridges, health sanitation and slum improvement under the purview of municipalities. But, the states are not obliged to transfer these functions to local bodies and there is variation across states as to the extent of transfer. This functionally distinct structure of rural and urban means that a panchayat may not be able to pursue policies that respond to the changes happening in its jurisdiction.

At the union government level, where the focus is more on financial incentives and grants for development, there is historically a sharp differentiation between rural and urban, where Union schemes have given preference to rural over urban in centrally sponsored schemes (CSS). For instance, the estimated allocation of Swachh Bharat Mission - Grameen (SBM-G) is Rs. 134,386 crore which is about seven times the support for the urban counterpart, SBM-U. As a result, many states prefer rurbanising places like CTs to remain rural, rather than classifying them as urban, to benefit from the larger budget for rural development (Sivaramakrishnan, 2002, Mukhopadhyay, 2017). Indeed, in 2004, Tamil Nadu switched the classification of over five hundred urban areas to rural, to obtain more funds from the Union (Denis, et. al. 2012).

The Dissonances

Gap in services: Differences in governance across the formal urban (ULBs) and rurban settlements is responsible for the gap in public services like piped sewerage or in-house water connections across them, despite a private demand for these services.[6]. Though these rurban spaces, i.e. the CTs and large villages are very different in economic structure, built-up area and services from other rural settlements, they are not capacitated to meet their changing requirements like drainage, septage management or street lighting, as all of them are governed by the same rural governance structure. Even within the urban periphery, public service provisions like piped sewer falls off sharply once the formal administrative boundary of the core city is crossed[7]. In most of the cities, it is lower in all settlements around the core city, and falls sharply with increasing distance from the core city.

Resistance to Reclassification: One consequence of this ‘denied urbanization’ (Samanta 2014) is that citizens resist state government proposals to reclassify them to ULBs[8]. While there is regional variation, a lot of services, especially sanitation, are individualised due to low provision of public facilities like sewerage network or piped water facilities.[9] However, Article 243 X of the Constitution permits the ULBs to collect taxes and duties, as authorized by the state legislature. Hence, the absence of property taxes and higher subsidies in rural areas can drive strong local interest to retain the rural-urban binaries (Mukhopadhyay et al, 2016), as people are often reluctant to pay extra for the services that they already self-provided. The poor provision of public services in smaller towns adds strength to this preference.

Resistance to integration: Concomitantly, in large metropolitan areas, where public services may be the responsibility of a parastatal agency like metro water boards, people prefer to be in smaller municipalities rather than become part of an expanded core city. For example, 18 new municipalities were created around Hyderabad during August 2018 to regulate land development in the city’s peripheries. In course of this process, the government negotiated with the elected representatives of the erstwhile GPs to make them separate ULBs, instead of merging with Hyderabad, where they feared that taxes may be higher.[10]

Employment: These unequal service provisions across the rural-urban spectrum affect the economic transformation of rurban areas. While some specific labour-intensive manufacturing industries are moving out of the municipal boundary, growth restrictions prevent significant employment growth in such districts (Desmet et al, 2013). In some of these districts, there are concentrated clusters of well-developed household industries, like the carpet and handloom clusters of UP or bidi clusters of West Bengal. These, if integrated to the wider economic geography, can enhance the growth machine and provide substantial local employment.

Transport: This is another issue that falls between two stools. The movement of labour and spatial distribution of jobs in urban peripheries are linked to the availability of multimodal and intermediate public transport like three wheelers, but there are no clear functional domain in the rural governance framework to regulate this[11]. As a result, despite having a low cost of operation, these modes are pushed to the fringes rather than becoming an integral part of the public transit system, making it harder for labour to access employment.

Over time, these limitations can have repercussions on the future growth of CTs and large villages[12], where large sections of the workforce are only precariously engaged in non-farm jobs as small entrepreneurs or casual workers (Chatterjee et al, 2015; Swerts et al, 2018). Even where necessary factors to provide a more solid non-farm transformation are present, the prevailing functional and fiscal domains can prove to be a bottleneck for such growth. If it were possible to overcome these dichotomies, there could be significant employment growth.

Policy Recommendations

The onus to overcome these rural-urban binaries in the governance framework and integrate a variety of interlinked rural-urban functions is on both the union and federal levels of government.


At the state level, the effort should be to make the functional domain flexible, in case of rurban spaces. Even within the prevailing framework of the 11th and 12th schedules, it is possible to make such provisions. For example, the 12th Schedule does not make any distinction between the categories of urban areas like municipal corporations, municipal councils and Nagar panchayats in devolving urban management functions. The language of the Act does not restrict the states from devolving functions from the 11th schedule to ULBs or functions from the 12th schedule to panchayats.[13]  Using this flexibility, states can transfer functions like permitting building licenses, sub-divisioning and readjusting land for variable uses, or regulating permits and lay-out routes to transport modes, like e-rickshaws, to the rurban areas.

The size-insensitive character of the urban governance framework (Sivaramakrishnan, 2013) can be also be used to functionally empower smaller ULBs or empower panchayats to provide “urban services” so that citizens in CTs and other rurban spaces get desired levels of service and incur an obligation to pay, where appropriate. However, these devolutions should be made with regard to local capacities and political environments.

More co-ordination in land-use and key infrastructure across the rural-urban gradation is necessary, especially in transport, water treatment plants or solid waste management, etc. As most rurban development, especially in the periphery and along corridors, usually follows the trunk routes of transport infrastructure, urban planning needs to happen simultaneously with the expansion of transport networks. The use of spatial data over time can help with this.

There is also a role for mechanisms, some defunct in many states[14], like the District Planning Committee (DPC) and Metropolitan Planning Committee (MPC) to institutionally co-ordinate between rural and urban local governments (Sivaramakrishnan, 2013). These, or similar, structures can also enable States to blend funding from various sources to address the needs of rurban spaces.


At the Union level, there is an urgent need to break out of the hardcoded definition of rural and urban. There is wisdom in being cautious about absolute conversions of CTs into STs[15] (PIB, 2016). Given the variety of circumstances under which CTs are formed, States would need to deploy a case-specific approach to leverage their urban characteristics.

Designs for central schemes must not impose restrictions by typology of location because services in rurban areas need a fit-for-purpose approach. For example, SBM-Grameen focuses on constructing twin-pit latrines on priority basis in rural areas, but many rurban spaces where the use of septic tanks was already high at the start of the mission, would have been served better by efficient septage and fecal waste treatment management. Therefore, it is avoidable to hard code central scheme interventions by specifying technologies for urban and rural spaces.

At the implementation level, states must have the flexibility to evolve modus vivenda to address rurban needs. For example, given how mobile labour is, states should be able to use funds from the National Urban Livelihoods Mission in a variety of locations, including peripheries and corridors. Similarly, though PMAY avoids some of the pitfalls of hard coding by supporting state and region-centric variations in materials and technology, PMAY-Urban may be more suited for peripheral villages, instead of PMAY-Rural.[16]

Disassociating schemes from their location is challenged by the existence of separate ministries for rural and urban development, but schemes like SBM that do not come under these can choose to function outside of this binary. For example, the central scheme for working women hostel has transcended this binary and since its inception in 1972-73 has been catering to urban, rural and even semi-urban areas where employment opportunities exist for women under the umbrella of the Ministry of Women and Child Development.

Another approach is to allocate funds from different schemes to fill the gap in key infrastructure and bridge the service vacuum between rural and urban. The Shyama Prasad Mukherji Rurban Mission (SPMRM) is a step in this direction, but its location within the Ministry of Rural Development limits its ability to aid ‘urban’ spaces.


As cities and their associated economic engines are beginning to be viewed, not in isolation, but as connected to their peripheries and as a part of a wider city system throughout South and South-East Asia, this is a good time for the new government to introduce an integrated approach to the urbanisation, bridging the artificial divides of the 11th and 12th schedules. It is time to build mechanisms that can facilitate inter-ministerial interlinkages and it might even be prudent to imagine a single ministry of local governance in the long run. For now, a category-agnostic approach to Central schemes and an architecture that allows States to respond flexibly would enable India to leverage the latent opportunity in rurban spaces.



Centre for Policy Research. (2016). Integrating intermediate public transport within transport regulation in a megacity: A Kolkata case study. Working Paper.

Chatterjee, P. (2011). Democracy and economic transformation in India. In Understanding India’s New Political Economy (pp. 33-50). Routledge.

Chatterjee, U., Murgai, R., & Rama, M. (2015). Employment Outcomes along the Rural-Urban Gradation. Economic and Political Weekly50(26), 5-10.

Denis, E., Mukhopadhyay, P., & Zérah, M. H. (2012). Subaltern urbanisation in India. Economic and political weekly47(30), 52-62.

Desmet, K., Ghani, E., O'Connell, S., & Rossi‐Hansberg, E. (2015). The spatial development of India. Journal of Regional Science55(1), 10-30.

Joshi, B., & Pradhan, K. C. (2018). Officiating Urbanisation. Working Paper. Centre for Policy Research.

Mehta, L., & Karpouzoglou, T. (2015). Limits of policy and planning in peri-urban waterscapes: the case of Ghaziabad, Delhi, India. Habitat International48, 159-168.

Mukhopadhyay, P. (2017). Does Administrative Status Matter for Small Towns in India? In Subaltern urbanisation in India (pp. 443-469). Springer, New Delhi.

Mukhopadhyay, P., Zerah, M. H., Samanta, G., & Maria, A. (2016). Understanding India's urban frontier: what is behind the emergence of census towns in India? The World Bank.

Nandi, Sangeeta and Shama Gamkhar (2013): “Urban Challenges in India: A Review of Recent Policy Measures,” Habitat International, Vol 39, July, pp 55–61

PIB (2016): “States Asked to Convert 3,784 Urban Areas into Statutory Urban Local Bodies,” Press Information Bureau, Ministry of Housing and Urban Affairs, Government of India.

Pradhan, K. C. (2013). Unacknowledged urbanisation: New census towns of India. Economic and Political Weekly, 43-51.

Randhawa, P., & Marshall, F. (2014). Policy transformations and translations: lessons for sustainable water management in peri-urban Delhi, India. Environment and Planning C: Government and Policy32(1), 93-107.

Ruet, Joel and Stéphanie Tawa Lama-Rewal (eds) (2009): Governing India’s Metropolises, New Delhi: Routledge India.

Samanta, Gopa. "The politics of classification and the complexity of governance in census towns." Economic and Political Weekly 49.22 (2014): 55-62.

Shaw, A. (Ed.). (2007). Indian cities in transition. Orient BlackSwan.

Sivaramakrishnan, K. C. (2013). Revisiting the 74th Constitutional Amendment for better metropolitan governance. Economic and Political Weekly, 86-94.

Sivaramakrishnan, K. C., Kundu, A., & Singh, B. N. (2005). Handbook of urbanization in India: an analysis of trends and processes. Oxford University Press, USA.

Sivaramakrishnan, K.C. (2002). Turning urban, staying rural. The Hindu. Accessed from, at 26/06/2019.

Swerts, E., Denis, E., & Mukhopadhyay, P. (2018). Diffuse Urbanization and Mega-Urban Regions in India: Between Reluctant and Restrictive Urbanism? In International and Transnational Perspectives on Urban Systems (pp. 237-262). Springer, Singapore.

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[1] The authors gratefully acknowledge the inputs of Kanhu Charan Pradhan while writing this piece.

[2] Only if the core city is taken into account, not the entire urban agglomeration.

[3] A census town is a settlement which has a population of 5000 or more, a population density of more than 400 persons/, and a male main workforce participation of 75% or more. All STs, which constitute an urban local body (ULB), are automatically defined as urban. Unlike India, many countries rely only on a population size to distinguish between rural and urban areas. If only population size was used to identify census towns in India, and villages with more than 5,000 inhabitants were considered urban, the share of the urban population would increase by about 15 percentage points.

[4] For example, the growth rate of the core city in the Mumbai metropolitan region is 0.4% while the periphery grew at 3.6%, within 2001-11.

[5] NSS 2011-12 consumer expenditure data reveals that a small town consumer spends about 70% of a consumer in million-plus cities. However, their spending pattern is very similar to large cities, with similar amounts being spent on items like conveyance, rent or consumer durables, as in million-plus cities. The share of households which owns a motorized two-wheeler is 28% in these rurban areas, and 27.8% in smaller STs, which has a population of less than 50,000. The share of households with septic tank is 58.8% in rurban areas, while it is 55.7% in smaller towns.

[6] The share of households with in-house access to water is 35% in villages, 59% in rurban areas (CTs and large villages) and 62% in smaller STs, which have less than a hundred thousand population.

[7] For example, the share of households connected to the piped sewerage network is 86% in the municipal area of Hyderabad, but drops to 50% in the other ULBs and 27% in the all the CTs in the Hyderabad metropolitan (HMDA) area. The share of villages with piped sewer in HMDA is 7%. Interestingly, the outgrowths of HMDA, which are also rural but are contiguous to the core city, have a higher share of piped sewer coverage at 52%.

[8] The interests of the state governments to reclassify the CTs or other forms of rurban spaces into ULBs also varies by the shifting growth trajectories across states. While states like Gujarat reclassified 24 CTs to STs within 2001-11, UP chose to not reclassify any of them into formally urban categories.

[9] There are a lot of self-provisions of public services like roads, piped connection of water to households in some of the richer peri-urban neighbourhoods of larger cities (Randhawa et al, 2014; Mehta et al, 2015).

[11] The Kolkata city is dominated by yellow taxis and auto-rickshaws, while the periphery is served by a variety of different modes of IPT services like the batter operated e-rickshaws, and diesel-fuelled vehicles like Tata Magic and Piaggio Ape. A lack of regulations at the RTA, police and local levels lead to contestations across there different kinds of services, which leads to operational issues and easy movement in the peripheries, instead of facilitating the services (CPR, 2016).

[12] An analysis of the 6th Economic Census (2012-13) data shows only about 20% of the CT population resides in such kind of settlements where the share of manufacturing to total workforce is more than 50%.

[13] The ambiguous part of the act has usually led to different responses from the state governments so far. There has been persistent resistance from the state governments to implement the provisions of the act in totality, and issues like water and sanitation management remains the prerogative of parastatal agencies under the control of state governments for a majority of cities. Very few financial and human resources functions have been transferred to municipalities and ULBs remain weak highlighting the unwillingness of the state to relinquish its control over the urban (Nandi and Gamkhar 2013, Ruet and Tawa Lama-Rewal 2009).

[14] While MPCs have rarely been set up in most states, they have been only involved into mere consultations while dealing with issues, rather than any active involvement in planning functions (Sivaramakrishnan, 2013).

[15] During May 2016, the erstwhile Ministry of Urban Development came out with a notification that asked all the 28 states to take ‘immediate and necessary action’ to convert all the census towns (CTs) into statutory urban local bodies (STs) to promote planned development.

[16] An ongoing CPR analysis of the PMAY-U data shows that approximately eighty villages have been included in the projects enlisted under PMAY-Urban, most of which are neighboring larger Urban local bodies.

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Center-state relations in India are at an important crossroads. In the last few years India has undertaken significant reforms aimed at reforming the institutional and financial landscape for negotiating center-state relations. These reforms highlights important tensions in the dynamic of center-state relations including related to the role of the center - how best to harness its resources, technical capacity and potential to negotiate conflict - while preserving the constitutional rights of States; growing regional inequality and the relationship with the third tier. Negotiating these tensions also requires rethinking the institutional landscape for managing center-state relations. CPR faculty examine these issues through the lens of social policy financing, urban local governments and the challenge of inter-state water conflicts. An important new contribution is to examine the potential for deepening the role of states in India's foreign policy, specifically border states.