Urbanisation Beyond Megacities | 19 Jan 2026

Source: TH 

Why in News? 

India is experiencing a significant shift of urbanization towards small towns. This rapid and unplanned growth presents both challenges and opportunities for balanced regional development. 

• Out of nearly 9,000 census and statutory towns, only 500 are large cities, while the vast majority are small towns with populations under 1,00,000, playing a key role in shaping India’s urban future 

What are the Key Factors Driving the Shift of Urbanisation to Small Towns in India? 

• Saturation of Megacities: Megacities like Delhi, Mumbai, and Bangalore have become economically saturated, with skyrocketing land prices, crippling congestion, and unbearable living costs for workers and mid-sized industries pushing capital and people to seek alternatives. 
• Decentralized Economic Growth: Small towns function as hubs for rural non-farm diversification, providing employment in agro-processing, logistics, and services to reduce agricultural dependence.  
  • Towns like Sattenapalle (Andhra Pradesh), Dhamtari (Chhattisgarh), and Bongaigaon (Assam) exemplify this shift, having evolved into key logistics nodes, and service centres.  
• Infrastructure and Policy Enablers: Infrastructure like Pradhan Mantri Gram Sadak Yojana (PMGSY) and state highways have improved physical access, while digital connectivity (BharatNet, mobile penetration) integrates towns into broader networks. Policy initiatives such as the Shyama Prasad Mukherji Rurban Mission and state industrial and investment policies further incentivize development by providing urban amenities and encouraging units in Tier-2/3 towns. 
• Demographic and Social Factors: Demographic pressures from a young rural population seeking education and employment drive migration to nearby small towns. At the same time, rising demand for better education, healthcare, and entertainment services accelerates the transformation of large villages into service-centric urban centres. 
• Resilience against Climate Vulnerabilities: Their smaller scale enables better environmental management through decentralized systems and reduces the heat island effect, providing a climate-adaptive urbanization model aligned with sponge city goals. 
  • Compared to megacities, small towns are less prone to public health crises (e.g., Covid-19) and more effective at implementing disaster-resilient infrastructure.  
• Preservation of Socio-Cultural Fabric: Small towns counter the homogenizing effect of metropolitan culture by integrating modern economic opportunities with the preservation of local languages, crafts, and traditions. For instance, Srirangapatna in Karnataka has developed as an urban centre while meticulously maintaining its cultural heritage and community structure. 

What Concerns are Associated with Shift of Urbanisation to Small Towns in India? 

• Urbanization of Poverty: The primary concern is that small towns are becoming sites for the "urbanisation of rural poverty." They absorb poor populations but fail to provide pathways out of poverty. 
  • Employment is dominated by highly informal and precarious work. E.g., Construction labour work without contracts or social security. 
• Emergence of Exploitative Local Hierarchies: New, unregulated economies allow local elites, real estate brokers, contractors, micro-financiers, and political intermediaries, to consolidate control over land, credit, and labour, leading to deepening local inequality and exploitation. 
• Governance and Institutional Deficits: Small towns suffer from low own-source revenue and inadequate access to institutional finance like municipal bonds, creating a perennial dependence on state and central grants that hinders autonomous planning. Furthermore, most develop without Master Plans or Building Byelaws, resulting in haphazard construction, encroachment on ecologically sensitive zones, and inefficient land use. 
• Infrastructure & Ecological Deficit: Flagship urban missions like AMRUT are metro-centric, leaving small towns with fragmented, inadequate infrastructure. Lack of piped water supply leads to dependence on private "tanker economies" and the indiscriminate mining of groundwater, creating severe ecological stress. 
  • There is a chronic deficit in water supply, sewage networks, solid waste management (SWM), and stormwater drainage. 
• Missed Demographic Dividend: With a young population migrating to these towns, the lack of quality education, skill development, and formal job creation risks squandering the demographic dividend. E.g., delivery, ride-hailing jobs with no job security or benefits.

What Measures are Required to Achieve Sustainable Urbanisation? 

• Formalizing the Informal Urban: To empower small towns, mandatorily notify qualifying census towns as statutory towns, followed by massive capacity building for the new Urban Local Bodies (ULBs) in planning and finance. Subsequently, develop simple, flexible, and enforceable Master Plans and Local Area Plans using GIS-based participatory mapping (e.g., SVAMITVA scheme) to integrate existing settlements and natural assets (water bodies, forests). 
• Building Foundational Infrastructure: Achieve 100% coverage of sustainable basic services—water supply, decentralised Sewerage Treatment Plant (STP), and SWM—by converging funds from AMRUT 2.0, Swachh Bharat Mission-Urban 2.0, and Finance Commission grants. Planning must prioritize non-motorised transport networks (walkways, cycle tracks), avoiding car-centric models. 
• Leverage Place-Based Economies: Strategically develop economies around local comparative advantage, agro-processing clusters, handloom & handicraft hubs, logistics centers, or eco-tourism, as envisioned under the Scheme for Formalisation of Micro Food Processing Enterprises (PMFME). 
• Adopt a "Rurban" Cluster Approach: Implement the Shyama Prasad Mukherji Rurban Mission in true spirit by developing rurban clusters where small towns anchor villages for economies of scale in service delivery. Mandate convergence of all central and state schemes (PMGSY, VB-G RAM G) at the small-town ULB level for integrated development. 

Conclusion 

The rapid growth of small towns in India reflects a structural urban transformation driven by economic pressures, demographic shifts, and policy enablers. While they offer opportunities for localized growth and climate-resilient development, challenges of informality, governance deficits, infrastructure gaps, and urbanised poverty demand urgent policy intervention for sustainable urbanisation.