Beyond Megacities: How Small Towns Are Reshaping India’s Urbanisation Trajectory

Why in News ?

Recent analysis indicates that India’s urban growth is increasingly being driven by small towns rather than large metropolitan cities, marking a significant shift in the country’s urbanisation pattern. While megacities such as Delhi, Mumbai, Bengaluru, and Chennai continue to dominate policy discourse, it is smaller towns—often with populations below one lakh—that are emerging as key centres of economic activity, employment, and migration.

Background: India’s Urbanisation Pattern Beyond Megacities

India has nearly 9,000 census and statutory towns, yet only about 500 qualify as large cities. The vast majority are small towns, many of which have historically received limited policy attention.

Traditionally, India’s urbanisation was viewed as:

• Metro-centric
• Industry-driven
• Concentrated around a few large urban agglomerations

However, a quieter transformation is underway. Small towns across different regions are increasingly absorbing population growth, economic activities, and migrant labour, indicating a structural shift in India’s economic geography.

Structural Drivers of Small Town Growth

The expansion of small towns is closely linked to changes in India’s development model.

1. Saturation of Large Metros

From the 1970s to the 1990s, large cities functioned as hubs of:

• Industrial production
• Infrastructure investment
• Labour absorption

Over time, these metros began experiencing over-accumulation, reflected in:

• Rising land and housing prices
• Infrastructure congestion
• Escalating living costs

This reduced their ability to absorb new economic activity and labour.

2. Dispersal of Economic Activities

As costs rose in large cities, economic activities increasingly moved to smaller towns, which offer:

• Cheaper land
• Lower regulatory barriers
• Flexible labour markets

Small towns are emerging as:

• Logistics and warehousing hubs
• Agro-processing centres
• Construction and real estate markets
• Service-sector nodes

3. Migration and Labour Absorption

Small towns absorb:

• Migrant workers pushed out of metros
• Rural youth facing declining agricultural livelihoods

These populations are integrated into urban economies, but often under precarious and informal conditions.

Nature of Urbanisation in Small Towns

Urbanisation in small towns is not merely an extension of rural life but a deepening of urban processes under distinct conditions.

Key characteristics include:

• Dominance of informal employment
• Construction labourers, home-based workers, and platform economy workers forming the economic backbone
• Weak regulation and limited political oversight

Rather than inclusive growth, this pattern often results in the urbanisation of rural poverty.

At the same time, new local elites—such as:

• Real estate intermediaries
• Contractors
• Micro-financiers
• Political brokers

gain control over land and labour, reinforcing socio-economic hierarchies while leaving workers vulnerable.

Policy and Governance Challenges

The rise of small towns exposes a growing mismatch between urban policy design and on-ground realities.

1. Metro-Centric Urban Programmes

• Flagship urban missions continue to prioritise large cities
• Small towns depend on fragmented schemes and short-term infrastructure funding

2. Inadequate Basic Services

• Poor water supply and sanitation
• Heavy dependence on groundwater and tanker-based water systems
• Limited public transport
• Growing ecological stress

3. Weak Local Governance

• Underfunded municipalities
• Limited technical and planning capacity
• Planning outsourced to consultants with minimal local participation

Implications for India’s Urban Future

Small towns now represent the primary frontier of India’s urban expansion.

Their trajectory will shape:

• Employment generation
• Migration patterns
• Environmental sustainability
• Social equity

If current trends continue unchecked, small towns risk reproducing the inequalities and ecological stresses of megacities, but without comparable institutional capacity.

At the same time, they offer an opportunity to reimagine urban development through:

• Integrated town-level planning
• Linking housing, livelihoods, transport, and ecology
• Strengthening municipal finances and participatory governance
• Regulating platform-based and informal economies

Way Forward

• Move beyond a megacity-centric urban strategy
• Recognise small towns as central to India’s urban future
• Empower local governments with finances and planning authority
• Promote context-specific, inclusive urban planning
• Strengthen regulatory oversight to protect workers and ecosystems

A reoriented urban policy can transform small towns into engines of equitable and sustainable development, rather than sites of deepening inequality.