Myth of the rural-urban divide

by diwakergupta on Sep 10, 2007      Category: Economics & Business Tags: india reforms

If there’s a lesson to be learnt from all of this, it’s that urban growth and rural growth aren’t distinct and separate phenomena. Our study suggests that a Rs 100 increase in urban consumption could lead to an increase in rural household incomes of up to Rs 39—no small feedback, and a strong counter to the popular perception of “two Indias”. If India’s cities keep growing at their current pace, in aggregate 6.3 million non-farm jobs in rural areas (more than the total number of new professional services jobs projected over the next 10 years) and $91 billion in real rural household income could be created over the next decade.

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kodysworld's picture

Hey Diwaker, the link does not work. Could you post the correct link? Tx, Rahul

nitiniitk's picture
nitiniitk's picture

The author of the article gives several stats very authoritatively, but little is presented in terms of how this research was actually conducted.
One thing I find troubling in most economic arguments, is that they measure growth by the amount of money spent (consumption).. is it really a good measure? Seem like other measures of quality of life are not easy to quantify..

kowsik's picture

I agree with you here. As they say at the end of the article, it is an 'edited excerpt' from the original article in The Wall Street Journal. If we have access to that from UCSD, we can check whether the original article has any info on the origin of the numbers. That said, I did not find the article to be surprising: in my last visit to my grandmother in her village, I did not find their standard of living to be noticeably inferior to that in a town.

As for the consumption part, my understanding is that unlike in USA, in India the spending in a house is less than the earnings of the house. We still have the tendency to save some part of our income. So consumption can be a measure of income, which is a measure of the capacity for a higher quality of life: for example, clean water comes at a higher price than contaminated one, so does good food.


aaditeshwar's picture

There is seriously much confusion over definitions. What is the classification for rural vs urban? rich vs poor? urban poor vs rural poor? Can this be measured on the basis of income or consumption alone? Here's a good article about how poverty was traditionally measured in India, and how such statistics can be made to take up any face: It also talks about a capability-measure for poverty, which probably depends upon various contextual factors that would matter differently in rural and urban areas.

To add to the confusion, I came across a new term: the peri-urban interface.
It takes an interesting time-dependent perspective on how rural areas integrate with urban areas, and how these "interfaces" become places of high flux and contradictory policies. I particularly liked the categorization of how this change leads to both opportunities as well as problems. I think Ameet's post about the benefits of urbanization should also be examined in this light: urbanization as in moving to cities, or urbanization as in transforming rural areas into urban centers? Take a look at this excellent urbanization-chart on BBC: As you can see, it is not just a few cities that are attracting more and more people, but newer and newer cities that are coming up.

There is no doubt that rural and urban economies are inextricably woven together, but poverty comparisons should always be examined with care.

ameetdesh's picture

A good economic analysis of urbanization is RISC paradigm.
It cites that rural markets suffer from 'coordination failure', and offers a solution in form of aggregated village markets & infrastructure to make them more efficient locally. It is similar to PURA, but focusses efforts & money in more economic sizes instead of at every village.

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