CHAPTER -1

URBANIZATION - MEANING &

DEFINITION, CHARACTERISTICS &
ECONOMIC IMPLICATIONS
 CHAPTER - I

(A) MEANING AMD DEFINITION :

To understand, the meaning of Urbanization it is

necessary to understand first the terms involved in it, i.e.

"Urban",•"Urbanism" and "Urbanize". The word Urban generally

is referred in terms of demographic attributes (size and/or

density) or economic variables (the prevalence of non-

agricultural occupation)"*". In its demographic sense, Urban

is usually considered as agglomerations of a given size. The

U.S. Bureau of the Census takes it exactly in the same

sense. However, this size itself may be set at several

"Significant" but, Nonetheless , arbitrary levels. While,

size has not been the sole criterion for demarcation of

Urban and rural, it has been the most widely accepted and

the most important criterion among several used. The minimum

population requirement for Urban demarcation has varied from

5,000 persons, in India to 3,500 in the United Kingdom;

2,500 in the United States; 2000 in France; 2,000 in the

2
Peoples Republic of China and 1,-000 m the USSR .
3 4
Some writers like Mark-Jefferson and Wilcox use

1. J.P.Gibbs(ed), Urban Research Methods, Van Nostrand

Company, Inc. Princeton, New Jersey, New York (1961),p.14
2. Philip M. Hauser (ed.), Urbanization in Asia and Far
East, Proceedings of the Joint UN/UNESCO Seminar (in
Cooperation with the International Labour Office) on
Urbanization in the ECAFF Region, Bangkok (8-18 August,
1956), p. 128.
3. Mark Jefferson, the Anthropogeography of some great
cities, "Bullatin of American Geographical Society, XLI
(1909), pp. 537-660.
4. W.F. Wilcox, "A definition of city in terms of Pousity",
in E.W. Burgess's the American Community Chicago, (1926),
p. 119.

-I-
 2

the term Urban in the sense of density of population. Thus,

in several countries, a density of not less than a specified

level, say one thousand inhabitants per square mile has been

laid down.

In terms of economic variables, Urban is usually

identified with that area, where more than three-fourth of

the total population is engaged in non-agricultural

occupations.

However, any single criterion fails to define

urban in a satisfactory manner. Some authors - notably

Sorokin and Zimmerman have, therefore, adopted various

criteria and have given a 'multiple' or 'compound'

definition of the word, Urban. In their opinion, Urban may

be distinguished from rural in respect of occupation, size,

density, heterogeneity, mobility, social differentiation and

stratification and system of interaction of population.

Gibbs observes that "there is some hazard, on the

theoretical level, in using compound definition which mixes

5
different universes of discourse . In fact, if all the

factors given by Sorokin and Zimmerman are taken into

account, very few places will qualify for Urbanship."

The definition of Urban is a complex matter and

the diversity in the national definition of Urban cannot be

eliminated. As the United Nations Demographic Yearbook has

indicated, definitions of "Urban" fall in to three major

types; (1) Classification of minor civil divisions on a

chosen criterion which may include (a) type of local

government, (b) number of inhabitants, (c) proportion of

5. J.P. Gibbs, Op.Cit., p. XVIII

 3

population engaged in agriculture; (2) Classification of

Administrative Centres of minor rural divisions as Urban and

the remainder of the division as rural; and (3)

Classification of certain size localities (agglomeration) as

urban, irrespective of administrative boundaries, A few

definitions of Urban adopted by the major countries of the

world are as follow

CENSUS (1901) :

A town was defined as any area in which the

Municipal Act or the cantonment Act of 1856 (Chaukidari) was

in force, or
any continuous group of houses containing a
7
population of not less than 5,000 persons .

CENSUS (1911) :

No definition was given in the report but it was

mentioned that "the typical country town, therefore, is an

exaggerated village with a certain non-agricultural

population attracted by the convenience of its site".

CENSUS (1921) :-

A town is characterised by (i) every continuous

group of houses permanently . mhabited by not less than

5,000 persons and (ii) every area in which Act II of 1914

or Act of 1916 is in.force.

EXPLANATION 1 :

Where several villages lie so close together that

their houses form a continuous group with a population

exceeding 5,000 such group is a town.

6. For full details, see United Nations Demographic Yearbook

(1962) Table 6, pp. 168-186 and Demographic Yearbook
(1955), p. 26.
7. Census of India 1961, Vol. XV, Uttar Pradesh, Part II A,
p. 14.
 4

EXPLANATION 2 :

Where one village is broken up into district

groups of houses, none of which contains more than 5,000

inhabitants, then though the population exceeds 5,000, the

village is not a town.

EXPLANATION 3 :

Where separate groups of houses have been united

for the purposes of the Acts mentioned above, they will be

considered one town.

CENSUS (1931) :

1931 census, divided urban places into two

categories, viz., town and the city. A town is- (i) any area

in which U.P. Act II of 1916 is in force, i.e., any

Municipality, (ii) any area under section 337 and 339 of

U.P. Act II of 1916 i.e., any Notified Area; (iii) any area

under U.P. Act II of 1914, i.e., any town area; (iv) any

contenment; (v) any continuous group of houses permanently

inhabited by not less than 5,000 persons, which having

regard to the character of the population, the relative

density of the dwellings, the importance of the place as a

centre of trade and its historical associations, the

provincial census suprintendent decided to treat as town.

A city is only a large town, which was defined as

(i) any town whose population in 1921 was not less than

1,00,000. (ii) any town which the total government declared

to be a city for census purposes^.

8. Ibid.
 Included in such cities are not only the

Municipalities but also many cantonments, Notified Areas or

Railway Colonies that may be adjacent to them, so that in

many cases a city is actually a collection of census towns.

CENSUS 1941 :

In adopts the definition of 1931 census.

CENSUS (1951) :

A town was defined as (i) any area in which U.P.

Act of 1916 is in force, i.e., any Municipality; (ii) any

area under sections 337 and 339 of the U.P. Act II of 1916,

i.e. Notified Area; (iii) any area under U.P. Act II of

1914, i.e. town area; (iv) any area under the cantonment Act

of 1921 i.e. ^any cantonment; and (v) any other continuous

group of houses permanantly inhabited by not less than 5,000

persons, which having regard to the charcter of the

population, t;he relative density of the dwellings, the

importance of the place as a centre of trade and its

historic associations, the state census superintendent

decided to treat as a town.

EXPLANATION 1 :

Where several villages lie as close together that

their houses form a continuous group with a population

exceeding 5,000, such groups may be treated as a single

town under (v) above.

EXPLANATION 2 :

Where one village is broken up into district

groups of houses none of which contains more than 5000

inhabitants then although, the total population exceeds

5,000, the village is not a town.

 6

EXPLANATION 3 :

By the area of a town is meant

(i) the area demarcated for the purposes of the above Act;
and

(ii) the area occupied by the group of houses and the land
immediately appurtenant there to.

A city is (i) any town whose population is not

less than 1,00,000; and (ii) any other town with an expected

population of 50,000 or above which the State census

Superintendent with the sanction of the State Government may

decide to treat as a city for census purposes. In many

cases, a city is a collection of census towns.

CENSUS (1961) :

The census 1961, demouncess the following kind of

places as urban areas;

1. All Municipalities and Notified Areas;

2. All cantonments;

3. All localities though not in themselves local bodies,

yet are part of city or town agglomeration; and

4. All places which satisfied all the three conditions

below at the 1951 Census.

(a) Population exceeded 5,000

(b) Atleast three fourth of the population depended on

nonagricultural livelihood, and

(c) Density of population exceeded 1,000 persons per

square mile.

All places of the above categories have been

treated as towns and such of them as have a population of

one lakh and above have been treated as cities.

 7

Apart from these, villages which showed an Urban

pattern in 1961 census, i.e. atleast three-fourth of working

population of which was non-agricultural, were also treated

9
as towns after enumeration .

CENSUS (1971) :

The census definition of Urban area for the 1971

Census was generally the same as was adopted at the 19 61

census. The places specified as below were treated as Urban

1. All Municipal Corporations, Municipal Boards,

Cantonment Boards and Notified Areas;

2. All localities which though not in themselves local

bodies were part of the city or town agglomeration;

3. All other places which satisfied three conditions

mentioned below

(a) Population exceeding 5,000,

(b) Atleast 75 per cent of the male working population

engaged in non-agricultural persuits, and

(c) Density of population exceeding 1,000 per square

mile (400 persons per square Km.)

URBANISM :

Urbanism refers to the way of life generally

associated 'to'identify the phenomenon of city residence"^.

But this is too limited view of Urbanism because Urbanism is

not excluded from rural areas. Bergel accepts it as "a

11
condition or set of circumstances"

9. Ibid, p. 15.
,10. Stuart Queen and David B, Carpenter, The American City
New York (1953), p. 29.
11. E.E. Bergel, Urban Sociology, Mecrow Hillboor Company,
Inc., New York, p. 10.
 8

Wirth is relatively more correct when he treats

urbanism as a distinctive characteristics of urban life. He

mentions heterogeneity, high degree of dependence of

urbonites upon others, the segmental character of urban

social relations and the Sophistication and rationality

of the Urban people to be the distinguishing characteristics-

No doubt, these characteristics are found even in farmers

but these are more prevalent in urban areas than the rural

areas. Again, it may be pointed out that these

characteristics differ from country to country and from one

urban place to another in the same country. In India as well

as in other countries, some of the essential characteristics

of urbanism are psychological. It is often true that urban

man must think faster and may speak faster while keeping his

thoughts to himself. He has a quick sense of humour,

whichever demands now forms of expression; he does not use

old jokes. The urbanity of the urbanized man is evident in

his ability to enter and exit from the impersonal role, as

when walking with the crowd his ability to utilize anonymity

as privacy. He is likely to be modeconscious in matters of

dresses conversation and manners. The urban way of life may

also be evident in one's possessions, television, radio,

telephone, electric devices in the home, the type of

kitchen, many articles with which the home is decorated,

12
especially, types of books and pictures

12. Nels Anderson, over Industrial Urban Civilization, Asia

Publishing House, 1964, p. 3.
 9

The agriculturist is .not dominated by the clock,

for his life is strictly controlled by the cycles of nature,

but Urban life is increasingly separated from the rule of

nature as it becomes increasingly industrial. Machine and

mechanism become more important. The water supply system,

the drainage and sew age system, other communication net

works, the street lighting and traffic control network

etc., are regulated by a more precise timing instruments,

13
which is the clock

URBANIZE :

The turm urbanize means to convert what is non-

urban into Urban.

URBANIZATION :

The term urbanization implies to the movement of

people to urban areas. Thompson uses the term just in the

same census when he writes, "Urbanization is characterized

by movements of people from small communities concerned

chiefly or solely with agricultural to other communities

generally larger, whose activities are prionorily centered

14
m Government, trade, manufacture, or allied interests

Prof. Hauser and Duncan characterize Urbanization as a

change in the pattern of population distribution. It

involves an increase in the relative size of the Urban

population, a growth in number and size of Urban settlements

or places and an increasing concentration of the population

13. Ibid. , p. 6
14. W.S. Thompson, Urbanization in Encyclopedia of Social
Sciences, Vol. XV, Macmillan (1935), p. 189.
 10
. , 15
m such places

Definition given by Thompson suffers from the

defect that it takes into account that movement is

inevitable for Urbanization though movement is an important

factor or Urbanization yet it may be conceived of without

movement as well.

It may happen firstly, by natural incrase of

population in urban places and secondly, by treating a rural

area as an urban area on account of some change in

occupation or even by a change in definition of urban

places.

Urbanization has been systematically treated by

Hope Tisdale Eldridge. He has argued that there can be no

• g

meaning of it but "a process of population concentration"

It involves two elements : (a) the multiplication of points

of concentration and (b) the increase in the size of

individual concentration. He further, emphasises that the

definition of urbanization in terms of population

concentration may at first seem too limited, but an

investigation of the possibilities of broader or different

definition will show that this is the only one which does

not lead to any kind of ambiguity. Its concreteness and

simplicity further recommend it; it gives us something

definite to hold of logically and etymologically, it is

15. Philip M I-Iauser and other Dudleg Duncan (eds). the study
of population - An Inventory and Appraisal the
University of Chicago Press, p. 34.
16. Hope Tisdale Eldridge,"The Process of Urbanization" in
J.J. Spengler and O.D. Duncan (eds), Demographic
Analysis Glencoe, III Free Press (1956), p. 338.
unassailable. The s'ox-i.'a'l point of view demands it since it comprehends
, . 17
the totality of the process both xn time and in space

Urbanization taken in this sense implies that so

lonq as urban places grow in size or multiply in number,

urbanization is taking place. It can stop, reaede or qo on

at any point in time or space. There can be urbanization

before there are cities and after there have been cities.

Further more, there can be absence of urbanization even

thouqh there are many cities. As soon as population

concentration stops, urbanization stops. How far

urbanization can go, we are unable to say, because we do not

know what limits of concentration a society may be able to

tolerate-1^ .

However, the definition given by Hope Tisdale

Eldridge in objectionable because it does net take into

account the economic aspects of the process. Urbanization

involves more than a mere increase in the number of points

at which population concentrates and a qrowth in the size of

these concentrations. In fact, it means an increasing shift

from aqrarian to industrial, service and distributive

19
occupation

The above discussion helps us in formulating a

relatively satisfactory definition of urbanization. We may

17. Ibid.
18 . Ibid. , p. 3 39 .
19. R.B. Vance and N.J.Demerath (Eds) the Urban soulb,
chapel Hill, the University of North Corolina Press
(1951), p. 3.
 12

define urbanization as a process whereby the number of

points of population concentration and/or the size of these

concentration increases and which involves a shift from

agrarian to non-agrarian occupations.

(C) CHARACTERISTICS :
The main characteristics of urbanization which

follow from our definition are as follows

(]) Urbanization involves an increase in the number of

of population concentration.

(2) It involves a growth in the size of these points.

(3) It involves a transfer of people from agricultural to

non-agricultural occupations.

Urbanization has generally been accompanied by the

increase in the number of urban places, in developed as well

as developing nations of the world. For example the number

of urban units^ of all size in the United States, increased

from 1,737 in 1900 to 3165 in 1930 and to 4,284 in 1950. In

case of India, the total number of urban places, as defined

in various censuses, increased from 1,917 in 1901 to 2,219

in 1931 and to 2,700 in 1961. However, there are great

differences among the various countries, regarding the

\
relative number of urban units in a specified range of

population. In some countries, the number of large

agglomeration is dominant over the smaller urban places,

while in others the smaller towns are more prevalent than

20. Those places having 2,500 or more inhabitants were

included in the list of urban units in the United
States.
 13

the larger ones. For example, more than 50 per cent of urban units in

India (viz., 1, 584 out of 2,700) fail under the category c£ urban places

having a population of more than 10,000, while in the United States, mare

than 70 per cent of total urban units fall in the range

having a population of less than 10,000 - Likewise, the

number of selected metropolitan cities varies from country

to country.

However, the above statement does not exclude the

possibilities that urbanization may proceed even without an

increase in the number of urban units. If the size of

existing urban units increases rapidly, urbanization will

progress, even if the number of urban units remains same or

even if it declines in some cases.

In the major part of the world, specially during

the last three decades, urbanization has been accompanied

more by an increase in the size of existing urban units than

the multiplication of points of concentration. However, the

rate of increase in the size of population varies from one

range of towns to another range in the same country and from

one country to another in the same range of towns, for

instance, in India, the rate of increase is much higher in

class I towns, i.e. town, having population of 1,00,000 and

above than the rate of growth in smaller towns. During

1951-61 the rate of progress in population was 44.s per cent

in class I towns while it was only 18.2 per cent in case of

class IV towns, i.e., towns with a population of 10,000 to

19,999. Again, the rate of growth in metropolitan cities has

21. U.S. Census of population, 1950.

 14

been higher in India than many countries of the world.

It is important to note in this context that the

characteristics of urbanization may be expressed in a quite

broad sense which is independent of the number of urban

units as well as the size of these units. In this sense, it

may be expressed as follows;

Pt

Where "U" is Urbanization, "Pu" is population in urban areas

and "Pt" is total population. Urbanization is characterised

by an incrase in the above ratio. Obviously, this ratio in

any country or region, can very independently of the

absolute number of the towns or absolute number of people

living in towns in that country or region. In fact, this

ratio is one of the fundamental traits of a soc-tdty because

it appears to bear a close relation to other characteristics

considered to be basic, such as, technological efficiency,

level of industrialization, mortality, fertility, literacy

and education. The less industrialized countries of the

world have to attain a low level of mortality, the control

of fertility, technological efficiency and a high degree of

literacy; and this is a source of great concern in their

attempts, to solve the practical problems that confront

them.

Urbanization is characterized by a mass shift in

the occupation. Specifically, it transfers the population

from agriculture to manufacturing and the service and

 15

distributive occupations. Thus, the proportion of workers

engaged in non-agricultural occupations increases as the

urbanization proceeds.

However, the characteristics of urbanization

differ in advanced countries from those in the developing

countries of the world.- Factors responsible for this

deference are : (1) that there is difference in the forces

making for urbanization in these two types of countries; (2)

that there is difference in the ratio of population to

resources and levels of living; (3) that there is difference

in basic outlook and value systems; and (4) that there is

difference in the technological advancement in these groups

22
of countries
ECONOMIC IMPLICATION OF URBANIZATION :

Urbanization is full of economic implications.

There is a close liasion between urbanization and economic

development. It exercises a perceptable influence on the

process of capital formation, i.e., saving and investment

and on industrialization.

URBANIZATION AND CAPITAL FORMATION :

Prof. Ragnar Nurkse defines capital formation as

follows

"A Society does not apply the whole of its current

productive capacity to the needs and desires of immediate

22. Philip M. Hauser, "Urbanization; An overview", in

Studies in Urbanization edited by P.M. Hauser and L.F.
Schmore, John Wiley and Sons, Inc. (1965), p. 37.
 16
consumption, but directs a part of it to the making of
capital goods, tools and implements, machines and transport

facilities, plant and equipment - all the various forms of

real capital that can so greatly increase the efficiency of

productive efforts" 23 . Capital formation depends upon the

supply of capital, which is governed by the volume of

savings and the demand for capital which is governed by the

volume of investments.

URBANIZATION AND SAVINGS :

It is argued, that urbanization during the early

stage of economic development would adversly affect savings.

The saving capacity of the low income groups of urban

population, is generally so small that it carries scarcely

any weight for economic development. As a rule, the incomes

of the urban working class despite the fact that they may,

in monetary terms, be much above those in rural areas - do

not leave an adequate margin for saving purposes in view of

the relatively high cost of housing and elementary consumer

goods and services.

Within the urban higher income groups, the rate of

savings is reduced by the propensity to spend. This tendency

is widespread even among people with very modest income who

tend to live at a higher standard than they can afford. This

may be seen in the tendency of Latin American countries to

assimilate more and more the pattern of consumption of the

United States despite the considerable disparity between

23. Regner plurkse, Op. Cit, p. 31.
 17
. . 24
the respective levels of the per capita gross product

Similar in the case with most of the under developed

countries of the world.

The development of effective demand of urban

consumers and with it the propensity to save, follows a

scale of preference which is subject to changes depending an

variations in income and cultural levels. Changes in the

demand pattern will also depend on the stage reached in the

process of incorporating urban settlens into established

urban life. Where urban growth is very rapid, a rather

larger proportion of the population only partially settled,

locks strong roots and this is naturally, interrelated with

its low cultural and income levels.

The consumption pattern followed in urban areas

depends upon the stability of occupation. Before the

stability of occupation, the people in urban areas spend the

greater proportion of their incomes on food with clothing

expenditure lagging far behind. After the stability has been

obtained, the proportion of income spent declines on food

but increases on clothing and service. At this stage, the

demand for improved housing, purchase of durable goods and

the demand for automobile for high income-group, absorbs a

greater proportion of income. Though, beyond this stage, the

competition between the current expenditure and the saving

to maintain that standard in future begins, upto this level

24. "The Relationship Between Population Growth, Capital

Formation and Employment Opportunities in Underdeveloped
Countries", proceedings of the world population
conference, 1954, p. 705.
 18

the consumption pattern shows a declining trend in

savings.

Rapid urbanization does not only have an effect on

private savings; it also influences to some extent the

saving capacity of institutions with a development more or

less parallel to that of urban growth. In this

connection, social security institutions and local

government bodies are of major importance. It is their

specific tasks to save as much public money as possible for

investment purposes. Nevertheless, there are several

indications that the over-all volume of such savings is

greatly reduced by unnecessary expenditure in current

administration, where ever staffing is chronic.

However, the above statement can not be used as a

generalization. In a country like India, where disguised

25
unemployment and underemployment is prevalent,

urbanization actually is a means by which the unproductive

labourers can be turned into productive labourers. Disguised

unemployment means that a substantial proportion of the

labour force is unemployed on land. These disguisely

unemployed people draw their subsistence from the income of

26
the productive population on land . If by any machinery,

these people can be released from land and set into

productive activities, the consumption of these people may

turn into the savings of the productive population.

25. Ragnar Nurkse, Op. Cit., p. 32.

26 . Ibid., p. 33.
 19

Urbanization serves the purpose of this machinery. It

increases the rate of eeffective savings by transferring the

people from rl;i sguiscly unemployed state to the productively

employed state. Regarding the savings of people in urban

areas, it may be said that their expenditure increases on

account of change in habit and social structure but it is

more than compensated by the increase in per capita income

resulting from the application of the improved methods of

production which accompany urbanization.

URBANIZATION AND INVESTMENT :

The high rate of urbanization has had a far

greater impact on the pattern of investment than on the

volume of savings. The economists dealing with economic

development often make a distinction between investment in

social overhead capital and investment in directly

productive activities. According to Hirschman, the former

comprises "those basic services without which primary,

secondary and tertiary productive activities cannot

function. In itswider sense, it includes all public

services from law and order through education and public

health to transporation, communication, power and water

supply as such agricultural overhead capital as irrigation

and drainage systems. Directly productive investment is

primary investmentin the production of goods, i.e.,

industrial investment, but it also covers building and

construction work and energy production. Investment in

educational and research establishment directly influencing

the development of the country's productive capacity may

 20

also be put under the same heading" 2 7

A proper balance between the two sectors. (Social

overhead capital and directly productive investment) must be

maintained if economic development is not distorted. Any

force disturbing this balance will hamper economic

development. The process of urbanization in under-developed

countries is said to hamper economic development because

with rapid urbanization. The demand for the investment in

social overhead capital increases in relation to the

investment in directly productive activities. This distorts

the pattern of investment in the sectors that might be

conceived as the most efficient from the general economic

development and employment points of view. This implies that

the demand for less productive projects (in the immediate)

will be made on the scarce capital resources available for

investment 2 8 • In other words, it diverts part of the scanty

capital resources available away from investment in

productive activities which are indispensable for the

progressive expansion of the labour market in width and
depth, i.e. to increase the number of employed and the

variety of employment and to raise earnings.

27. Albert, C. Hirscbman, the strategy of Economic

Development, New Haven and London Yale University Press,
p. 83.
28. Urbanization in Asia and the Far East, Proceedings of
the Joint Un/UNESCO Seminar, Bangkak, 8-18 August
(Calcutta : UNESCO Research Centre on the Social
Implications of Industrialization in Southern Asia,
(1957), p. 8.
 21

There are two main sources of such distortion,

each one connected with a different set of socio-economic

problems. On the one hand, Municipal and State authorities

have to provide certain basic needs for those people who are

making their living by economically unproductive occupation

or who have just "squatted" around a more productive and

wealthy urban nucleus. These needs are a heavy drain upon

public finances which could otherwise be kept for a

productive investment policy.

At the other end of the scale, the high propensity

to invest in urban real estate of the luxury type is partly

the consequence of the great inequality in income

distribution, resulting in excessive standards being applied

to business and dwelling units, serving the needs of

wealthier sections of the population which are willing and

able to pay the high rents. Primarily, however, it is the

result of specific features of capital markets and of the

lack of alternative guilt - edged investment opportunities

in the underdeveloped countries, specially those affected by

inf I’o. tion. In countries, where the cast of bank credit

approaches, and sometimes even falls below, the rate of

profit on borrowed funds through currency devaluation, any

one with access to long term credit can make high profits by

investing in urban real estate which offers relatively low

returns but the greatest possible security for the funds

invested. One of the consequences of this is the speculation

in urban land and the socially unjustified rise in prices of

building sites, with obvious repercussions upon housing

costs.
 22
However, it cannot be asserted that rapid

urbanization puts a heavy strain on the meagre capital

resources of a developing country by entailing heavy outlays

on urban infrastructure and social overheads that are

unproductive from the point of view of investment economy.

In fact, most of the underdeveloped countries lack the

minimum of the social overhead investment. In the absence of

minimum social overheads, it is not possible to get the

benefit of direct productive activities. Social overheads

facilitate directly productive activities on the one hand

and creates human welfare on the other. If these investments

are needed in these countries for their economic

development, urbanization plays a positive role in this

field.

Even the assumption that efficiency of investment

in directly productive activities is greater than that in

social overheads, may be questioned. It implies that the

statement that capital output ratio is high in social

overhead investments in comparison with directly productive

investment, is not true.

So far as the absolute productivity of social

overhead capital is concerned, it is greater in urban areas

than in rural areas. Prof. Sovoni states that "It is vastly

more productive to much of this kind of investment in the

cities than in the less developed rural areas" 29 - He also

points out towards the need of much investments in the

29. N.V. Sovani, Op. Cit., pp. 11-12.

 23

developing countries. He adds, "In regard to the most of the

underdeveloped areas, the infrastructure investments are

necessary both in rural and urban sectors and a large part

of the available capital resources has to go into them

away 30

Thus, urbanization, in the initial stage, may seem

to affect saving and investment adversely and may hamper the

capital formation. However, this tendency is not permanent.

In long-run, the process of urbanization facilitates the

capital formation and thereby provides a cushion for

economic development.

URBANIZATION AND INDUSTRIALIZATION :

Prof. Houselitz points out, "Although

industrialization and urbanization go usually hand in hand,

there is no necessary connection between the two processes.

Industries can be and have been established in rural

districts, and cities have grown up without large industrial

plants'31 . Historically too, the association posited is in

exact, as Heberle reminds us "Industrialization and

urbanization should not be considered as identical

process... cities have been in existence before industriali-

zation, and not all cities are highly industrialized 32

30. N.V. Sovani, Op.Cit., pp. 11-12.

31. Bert F Houselitz. "The city, the Factory and Economic
Growth", American Economic Review, May, 1955, p. 167.
32. Rudolf Heberle, "Social Consequences of the Indust­
rialization of Southern Cities", Social Forces, October
(1948), p. 29.
 24

This however, is not true. Urbanization and

Industrialization go hand in hand and they are positively

correlated with each other. Prof. Kingslay Davis and Colder

have reported Zeroorder pearsonian correlation of 0.86

between urbanization (defined as the proportion of the

population in places of 20,000 or more inhabitants) and

industrialization (as indexed by the percentage of

economically active males engaged in non-agricultural

pursuits)"^.

Economic history of every country reveals a close

relationship between industrialization and urbanization.

Modern large scale industries cannot develop unless there

are adequate economic and social overheads and economics of

scale are available, and these are available only in the big
towns and cities3^. In a seminar on urbanization in India

(held at Berley, California), Kingsley Devis has expressed

the relation even more clearly. He points out, "It is not

possible to have industrialization without urbanization....

There is no nation in the history, which has made the

economic transformation which has not also experienced the

urban change 35

Indeed, the most widespread characteristic of

economic development is the change in the structure of

production which it involves, and which consists in a

33. Kingsley Davis and Hilda Herts Golden," Urbanization

and the Development of Pre-Industrial Areas", Economic
Development and Cultural Change, October, 1951, p. 8.
34. Ashish Bose, "The Challenge of Urbanization", AICC
Economic Review, Vol. XII, January 6,1961, p. 39.
35. Kingsley Davis, The Population of India and Pakistan
Princeton, New Jersey, Princeton University Press, 1951.
 25

reduction of the relative importance of agriculture and an

increase in that of non-agricultural activities. Among the

countries where annual per capita income is lower than 200,

it is difficult to find one in which agricultural activity

constitutes less than 35 per cent of the total annual

product, while among those where income levels are higher

than 500, the corresponding contribution is seldom found to

exceed 25 per cent.

This alteration in the structure of production is

accompanied by a further change in the structure of

employment of labour; agriculture gradually loses importance

as a source of work. In contries with low income levels, not

less than two-thirds of the active population is employed

in agriculture, while in countries where annual per capita

income is higher than 500, the population in question is not

more than one third^^.

Thus, economic development implies a change in the

occupational structure of the working force towards non-

agricultural activities 37 • Non-agricultunsm or industriali­

zation as we may call itj is not as space - oriented as

agriculture. When we examine the theories of economic

activities and hence, of population, the link between

economics of specialization on the one hand, and economics

of localization on the other, becomes very clear. As there

36. Philip M Hauser, Urbanization in Lalin America, UNESCO

(1961), pp. 36-37.
37. Philip M. Hauser, Urbanization in Asia and the Far East,
p. 7.
 26

is gain efficiency owing to the expansion of the firm, there

is also a similar gain in the juxtaposition of producing

units if these are related by what are called economics of

industrial linkage. The benefits of localization apply as

much to small units of production as to large factories.

Thus, there are enduring economic benefits if production

processes are agglomerated.

Secondly, more than the development of secondary

industry, the growth of tertiary, or residentiary industry

almost always implies the concentration of several servicing

activities in Urban areas. However, it should be noted that

the preponderance of tertiary industries in urban areas of

several countries of Esia does not represent the evolution

those economics from a secondary to a tertiary basis

movement identified as progressive in the long run but

signifies the growth of marginal employment and low

production service industries, especially retail trading and

domestic services.

Prof. Colin Clark has indicated that the gradual

shift of the active population from agriculture to industry

and from industry to services in general is characteristic

OO
of any economic progress . Urbanization involves a

redistribution of population which implies that it pushes

the migrants from rural areas to urban areas. But this

migration does not mean only a movement of people from

38. Colon Clark, The conditions of Economic Progress,

London, Macmillan and Co. Ltd. (1951) Chapter V, VI and
VII.
 27

country to towns, it is accompanied by a shift in the

occupations of people. Specifically, urbanization implies

the transfer of workers from agriculture to manufacturing

and the service and distributive occupations. Thus; the

consequences of urbanization to general is the occupational

diversification which is favourable to economic development.

It will not be out of place to mention here that

one very important impact of urbanization which has a

special significance, both socially and in relation to

economic development, is related to the effect of the urban

way of life on population growth. The basic changes in the

way of life and value systems in the development of western

cities and urbanization have resulted in significant

declines in birth rates which, prior to world war II, gave

many of the more economically advanced countries, reason to

become concerned about stationary or even declining

population. Although, the post-war marriage and baby boom in

Western countries has deferred this apprehensions, atleast

for the time being, the fact is that the urban way of life

in the West has produced great declines in fertility to

match the gains in mortality and bring about a new

equilibrium in population growth.

The major objectives of economic development in

Asia is, of course, the raising of the level of living. The

level of living of a nation, however, can be raised only if

its aggregate product increases more rapidly than its

population, and since gains in mortality have historically

 28

accompanied the initial stages of economic development,

while fertility persisted at high level, rapidly growing

population threatens to defeat the objectives of raising

living levels. It is against this background that the rate

of ' the urban centres in depressing fertility rates

potentially, has significant implications for economic

development m Asia 39

- 0
-

39. United Nations, the Determinants and "Consequences of

population Trends, New York (1953), Part III, p. 181.