Rakesh Mohan: Asia's urban century - emerging trends
Keynote address by Mr Rakesh Mohan, Deputy Governor of the Reserve Bank of India, at the
Conference on Land Policies and Urban Development, organised by the Lincoln Institute of Land
Policy, Cambridge, Massachusetts, 5 June 2006.
I would like to express my deep appreciation to Shahid Yusuf for bibliographic guidance and inspiring discussions that brought
me uptodate on Asian urbanization. Assistance of Kumarjit Mandal and Partha Ray is gratefully acknowledged.
The references for the speech can be found on the Reserve Bank of India's website.
* * *
I. Urbanisation: a recent phenomenon
Widespread all pervading urbanisation is a truly twentieth century phenomenon. Although cities have
always existed, even cities such as Memphis, Babylon, Thebes, Athens, Sparta, Mohen-ja-daro and
Anuradhapura existed in antiquity, there is little evidence of widespread urbanisation in the early years
of civilization. Rome was perhaps the first settlement to reach 1 million people in BC; only in 1800 did
London become the second city to reach this population size.
In 1800, only 2 per cent of the world's population was urbanised. By the year 1900, out of a total world
population of close to 1.5 to 1.7 billion, only 15 percent of the population, about 250 million, lived and
worked in urban areas, a number lower than the total urban population of India alone today. By the
year 1950 the proportion of urban to total global population had risen to 30 per cent, with Europe,
North America and Oceania having the highest levels of urbanisation then. By the year 2000, 2.8
billion people lived in urban areas equaling approximately 49 percent of the world's population. So the
pace of urbanisation witnessed in the twentieth century was truly unprecedented, and it is a wonder
that the world has coped as well as it has. We are now at a turning point in human history: the number
of people living in cities is about to exceed those in the countryside, perhaps in this calendar year.
The last 50 years have been truly remarkable in terms of the number of people who have been
successfully absorbed in cities in a time period that is incredibly short by historical standards. While
the world's urban population grew by approximately 500 million between 1900 and 1950, it grew by
2.1 billion in the next fifty years; and is expected to grow by a similar magnitude in just the next thirty
years. The speed of urbanisation in Latin America in the second half of the twentieth century was
spectacular, vaulting from a just over 40 percent urbanisation level to 75 percent by the end of this
period which was also a period of rapid population growth and demographic transition. As may be
seen (Table 1) the focus of change is now in Asia with the urban population expected to double in the
next 30 years or so. This phenomenon of such rapid urbanisation is indeed unprecedented and it has
changed human geography beyond recognition. In the process the complexion of development
objectives and processes has also undergone significant change.
In the last two centuries, cities have consistently provided the environment for institutional and
technological innovation, and have often been referred to as "engines of economic growth"; "agents of
change" and "incubators of innovation". Between 1960 and 2000 world output went up four fold, while
urban population almost tripled, taking the world from 33 percent urban to 47 percent urban in forty
years (Table 2).
Table 1: Urban population growth across the globe
Urban Urban Population Urban Population Urban Population
Region Population
1900 1950 2000 2030
in Per in Per cent in Per in Per cent
Millions cent of Millions of total Millions cent of Millions of total
total total
Africa 32 14.7 295 37.2 787 52.9
Asia 244 17.4 1376 37.5 2679 54.1
Latin 70 41.9 391 75.4 608 84.0
America &
Caribbean
Oceania 8 61.6 23 74.1 32 77.3
Europe 287 52.4 534 73.4 540 80.5
North America 110 63.9 243 77.4 335 84.5
Global Total ~250 ~ 15 751 29.8 2862 47.2 4981 60.2
Increase 501 14.8 2111 17.4 2119 13.0
Source: United Nations (2002)
Table 2: Global GDP and growth in urban population
1960 1970 1980 2000
World GDP (constant 1995 $ trillion) 7.9 13.5 19.5 34.3
Share of agriculture in world GDP - 6.5 3.9
Share of industry in world GDP -38.0 20.8
Share of services in world GDP -55.5 66.3
World population (mm) 3020 3675 4428 6053
Per cent urban population 33.3 36.5 39.3 46.7
Source: World Bank database.
The twenty-first century will therefore be an urban century. For the first time in human history, more
people will live in cities than in the countryside. The urban situation will get more pronounced as the
century unfolds. As in the last fifty years, developing countries will be urbanising at a much more rapid
pace than developed countries.
A review of the regional dynamics of urbanisation reveals interesting developments (Table 3). There
has been a dramatic shift of the fulcrum of urban population away from Europe and North America to
the developing regions of the world. During the period 1950-2000, the growth rate of urban population
in Europe and North America was about 1.5 per cent. The share of Europe and North America in
global urban population declined from about 53 per cent in 1950 to 27.5 per cent in 2000 and is
expected to decline further to about 17 per cent by 2030. Africa has experienced consistent high
growth in its urban population, which grew at an annual rate of 4.4 per cent during 1950-2000, and its
share in global urban population is expected to rise to 16 per cent by 2030 (from 4.3 per cent in 1950).
Latin America has now become predominantly urban, surpassing urbanisation levels in Europe and
will almost be at par with North America by 2030. Interestingly, Asia is where almost half of urban
population of the world lives and soon it will have the majority of the world's urban population.
Table 3: Global urbanisation trends - level of urbanisation
(Per cent)
Region 1920 2030
World Total 19 61
Less Developed Regions 10 57
Africa 7 54
Asia 9 55
Latin America 22 85
More Developed Regions 40 85
Europe 46 83
North America 52 85
Oceania 47 75
Source: Mohan and Dasgupta (2005)
It is now well established that the acceleration of urbanisation generally takes place with
corresponding acceleration of economic growth. Urbanisation is promoted by (i) economies of scale in
production particularly in manufacturing; (ii) the existence of information externalities; (iii) technology
development, particularly in building and transportation technology; (iv) substitution of capital for land
as made possible by technological developments. Information asymmetries contribute to
agglomeration economies. As economies of scale in production begin to take hold larger size plants
become necessary, thus contributing to the need for larger settlements of people. The services
needed by the rising agglomeration of people gives rise to an even greater number of people living
together: thus cities are born and how they grow. As technology develops and capital is substituted for
land, taller buildings become possible, intensifying population densities further. Similarly, technology
development in transportation, enabling faster speeds, enables people to live at greater distances thus
contributing to the expansion of city size. The existence of agglomeration economies gives rise to
continuing accretion of people in a settlement, thus promoting city growth. These linkages become
more prominent with economic growth thereby promoting the acceleration of urbanisation. With the
growing weights of industry and services in developing countries, urbanisation has proceeded apace
over the last 50 years. As we will see, the relatively concentrated pattern of Asian urbanisation that
has occurred along with a very high rate of economic growth perhaps best illustrates the economic
gains accruing from agglomeration economies and economies of scale.
II. Asia becomes urban
Presently the highest rates of economic growth are being witnessed in Asia, and hence high urban
growth. This is particularly noticeable in China and India, which today have the largest rural
populations but are urbanising rapidly. Even in other Asian countries where a large number of cities
are witnessing high rates of economic growth, the growth in their urban population is also going to be
higher. Of the 10 most populous countries, 6 are in Asia (Table 4). Even as more than two billion
people will be added to Asia's population in the next 30 years many of these countries will still be
rapidly urbanising. This phenomenon has now gained such prominence that even popular news
magazines have begun to take note (Newsweek, 2003). This is also reflected in Figure 1 which shows
that rural population in Asia is expected to decline, in absolute terms during 2000-2030, yet another
unprecedented event, while urban population will almost double during the same period. Therefore,
while thinking and thought processes related to urbanisation were dominated by the growth of
urbanisation in Latin America between 1950 and 2000, the 21st Century will be the "Asian Urban
Century".
Table 4: Emergence of mega cities:
Population of Cities with 10 million or more inhabitants
(in Millions)
1950 1975 2000 2015
New 12.3 1 Tokyo 19.8 1 Tokyo 25.2 1 Tokyo 27.2
York
2 New 15.9 2 Sao Paulo 18.3 2 Dhaka 22.8
York
3 Shangha 11.4 3 Mexico City 18.3 3 Mumbai 22.6
i
4 Mexico 10.7 4 New York 16.8 4 Sao Paolo 21.2
5 Sao 10.3 5 Mumbai 16.5 5 Delhi 20.9
Paulo
6 Los Angeles 13.3 6 Mexico City 20.4
7 Kolkata 13.3 7 New York 17.9
8 Dhaka 13.2 8 Jakarta 17.3
9 Delhi 13.0 9 Kolkata 16.7
10 Shanghai 12.8 10 Karachi 16.2
11 Buenos 12.1 11 Lagos 16.0
Aires
12 Jakarta 11.4 12 Los Angeles 14.5
13 Osaka 11.0 13 Shanghai 13.6
14 Beijing 10.8 14 Buenos 13.2
Aires
15 Rio de 10.8 15 Metro Manila 12.6
Janerio
16 Karachi 10.4 16 Beijing 11.7
17 Metro Manila 10.1 17 Rio de 11.5
Janerio
18 Cairo 11.5
19 Istanlbul 11.4
20 Osaka 11.0
21 Tianjin 10.3
Source: United Nations (2002).
Figure 1: Growth in urban and rural population in Asia over the years
Source: UN, 2002
By 2030, Asia alone will have about 2.7 billion urban people accounting for over 50 per cent of its total
population. All the other regions of the world will have a combined urban population of about 2.3
billion. Six of the 10 countries with the largest urban populations are in Asia. Urbanisation in
Bangladesh has been among the fastest in the world (5.6 per cent during 1950-2000). The only
African country in the top 10 list, Nigeria, has also urbanized very rapidly in the past 5 decades (World
Urbanisation Prospects, 2001). Interestingly, by 2010, Lagos is projected to become the third largest
city in the world.
Moving to the city level urbanisation trends, the growth of urban agglomerations in developing
countries has far exceeded that in developed countries. In 1950, there was only one city with a
population of over 10 million people: New York City. In 2000 there were 17 cities with a population
above 10 million, 22 cities with population between 5 and 10 million; 402 with a population of 1 to 5
million; and 433 in the 0.5 to 1 million category. An important characteristic of urbanisation in Asia has
been the emergence of mega-cities - large multi-nuclear urban agglomerations of more than 10 million
people. There were no such agglomerations in Asia in 1950, two in 1975 and by 2000, 10 of the 17
global megacities were in Asia. It is expected that 12 out of the 21 mega cities in the year 2015 will be
in Asia (Table 4).
Of the 21 cities expected to reach 10 million plus by 2015, 17 of them will be in developing countries.
Of these 17 cities, 11 of them will be in developing countries in Asia and those will be Dhaka, Mumbai,
Delhi, Jakarta, Kolkata, Karachi, Shanghai, Metro Manila, Beijing, Istanbul and Tianjin (Table 5).
Table 5: Out of the 10 most populous countries 6 are Asian
1950 2000 2030
Per cent Population Per cent Population Per cent Population
Country
urban (mn) urban (mn) urban (mn)
1 China 12.5 555 35.8 1275 59.5 1485
2 India 17.3 357 29.0 1009 40.9 1409
3 USA 64.2 158 77.2 283 84.5 358
4 Brazil 36.5 54 81.2 170 90.5 226
5 Indonesia 12.4 79 41.0 212 63.7 283
6 Nigeria 10.1 30 44.1 114 63.6 220
7 Pakistan 17.5 40 33.1 141 48.9 273
8 Mexico 42.7 28 74.4 99 81.9 135
9 Japan 50.3 84 78.8 127 84.8 121
1 Bangladesh 4.3 42 25.0 137 44.3 223
0
Source: United Nations (2002)
The historical pattern of urbanisation suggests that countries tend to urbanise very slowly until they
attain urbanisation levels of around 25 to 30 per cent. The pace of economic growth and overall
development then quickens, with rapid structural shifts occurring in the economy, away from
agriculture to industry and services. The pace of urban growth between urbanisation levels of 25 to 30
per cent and 55 to 60 per cent has typically been observed to take place in a very short historical time
frame of 25 to 50 years. This happened in European countries and North America at different times in
the late nineteenth century and early twentieth century, and in Latin America during the latter half of
the twentieth century. Japan went from about 25 per cent urbanisation level in 1930 to over 70 per
cent in 1970; and Korea from about 25 per cent urban in 1955 to 50 per cent by 1975. During this
rapid phase of urbanisation, the demand for urban infrastructure investment is massive and countries
have usually been observed to need external savings to supplement available domestic resources to
finance such investment. So far, the world has been able to cope with such demands as the scene of
urbanisation has shifted from one region to another and the overall magnitude of increase in urban
population has been manageable. What is new in the next 25 to 30 years is that three of the world's
most populous countries, China, India and Indonesia, with combined total population of about 2.5
billion will be undergoing this process simultaneously, with Pakistan and Bangladesh not much far
behind. The magnitude of the increase in urban population in Asia in this period will be unprecedented
and will undoubtedly give rise to unforeseen problems as well as opportunities.
The popular view of towns and cities in developing countries, and of the urbanisation process, is a
negative one, despite the benefits it brings. For many, the emergence of such cities connotes
environmental degradation, the generation of slums, rampant urban poverty and unemployment, loss
of control and traffic chaos. But what is the reality? Given the unprecedental increase in urban
population over the last 50 years from 300 million in 1950 to 2 billion in 2000 in developing countries,
the wonder really is how well the world has coped, and not how badly. In general, the urban quality of
life has improved in terms of availability of water and sanitation, power, health, education, telephones,
and the like, and poverty has fallen. These improvements must be viewed against the fact that they
have been achieved in the presence of rapidly increasing population, under difficult fiscal situations,
and with strained human resources for the emerging needs of public management.
By way of illustration, we can look at the coverage of water and sanitation services in Asian cities. As
presented in table 6 a large number of urban residents have been provided with improved water in
urban areas in Asia's largest countries. Although in some countries such as China, Indonesia and the
Philippines, the access to improved water in terms of percentage of total urban population seems to
have declined from 1990 to 2000, in absolute numbers, millions of additional citizens have actually
been provided improved services. Although the definition of urban areas as well as the concept of
improved water services varies across the different countries referred to in the following tables, the
increase in access is documented by each country within their own definitions as presented here. In
the four countries taken together, an additional population of approximately 262 million has been
provided with improved access to water in urban areas during the 1990s, which is a population greater
than that of most countries today.
Table 6: Improvement in access to water in urban Asia
Per cent of urban population with access to Additional people
Country Improved water provided (million)
1990 2000 1990 to 2000
China 99 94 115
India 88 95 107
Indonesia 92 90 27
Philippines 93 91 12
Korea, Rep. 97
Source: World Bank database, 2003
These countries in Asia have made significant progress in the provision of sanitation services too,
together providing for an additional population of more than 293 million citizens within a decade. In this
parameter there has been a consistent increase in the percentage of urban population covered in all
the countries (Table 7).
Table 7: Improvement in sanitation facilities in urban Asia
Country Per cent of urban population Additional people
with access to provided (million)
Improved sanitation facilities
1990 2000 1990 to 2000
China 57 68 130
India 44 61 96
Indonesia 66 69 23
Philippines 85 93 15
Korea, Rep. 76 29
This general improvement in access to urban infrastructure and services in the Asian cities can be
observed in other sectors too such as health services, education and housing. Looking at the change
in poverty levels too is revealing; in terms of both nutrition levels and life expectancy most of the Asian
urban areas have seen consistent progress. However, in income poverty terms the experience has
been mixed, bringing to the fore the importance of macro-economic management of a country, and its
relevance for urban poverty reduction. In India, a steady macro economic environment and economic
growth in the 1990s has led to steady improvement in income poverty levels.
Progress in the provision of essential urban services has been significant. Unlike the popular view that
urbanisation causes deprivation, urbanisation has been relatively well addressed in Asian cities and
has led to an increase in living standards and quality of life of its residents. Given the (i) vast increase
in urban population in these countries, (ii) low per capita income, (iii) constrained fiscal circumstances
of governments, leading to low expenditure on urban infrastructure, and (iv) the existence of weak
local governments in most urban areas, the progress achieved is indeed quite noteworthy. In all
probability the quality of life in developing Asian urban areas is significantly better than the situation
witnessed in the 18th and 19th centuries in European cities, which had grown under similar
circumstances, but perhaps at higher prevailing income levels. We may also recall that they did not
have to cope with mega cities during their phase of rapid urbanisation. These achievements have
probably been enabled by the availability of better technology and systems now.
III. Some distinctive features of Asian urban growth
The rapid economic growth of Asia in the last half century must be amongst the most spectacular
periods of development in recorded human history. The magnitude of population that has benefitted
from this growth far surpasses that of the rest of the world, and in particular of Western Europe and
North America. Broadly speaking, the evolving pattern of Asian urbanisation has naturally
corresponded to the shifting focus of economic growth over this period.
Economic growth in Asia was kindled by the remarkable post World War II recovery of Japan in the
1950s and 1960s, and stretching into the 1980s when Japan became the second largest economy in
the world. A particular characteristic of Japanese economic and urban growth was the heavy
concentration of economic activity in the Tokkaido region (Tokyo - Nagoya - Osaka corridor), which
was aided and abetted by an apparent conscious choice of concentrated infrastructure investment in
this region. The Japanese economy benefited from high savings and investment rates (almost 40 per
cent of GDP by 1970) during this period, which provided the resources necessary for the heavy
transportation and urban infrastructure investments that were made. The rapid increase in
manufacturing investment and production gave rise to high growth in manufacturing employment that
was responsible for very high rates of rural urban migration. The Japanese countryside was literally
drained of people during this period and the Tokkaido region became one of the most densely
populated urban corridors in the world. Between 1950 and 1970 Japan's rural population fell from its
peak of about 52 million to less than 30 million; by then almost 40 per cent of Japan's total population,
and as much as 60 per cent of its urban population was concentrated in the 500 km Tokkaido coastal
corridor (Mills and Ohta, 1970). The kind of economic concentration that emerged was perhaps
instrumental in economizing on infrastructure investment that would have been larger had it been
spread out over a larger part of the country. The geographical proximity of different activities gave rise
to agglomeration economies that aided rapid productivity growth and also enabled innovation in
traditional production processes through the introduction of new systems such as Just-in-Time (JiT)
modes of inventory management. Such innovations enabled much more outsourcing of components, a
process that contributed to the drastic reduction in manufacturing costs that was the foundation of
Japan's competitiveness. The more efficient inventory management resulting from JiT and overall
supply management has also enabled significant reduction in corporate need for bank financing,
leading to significant changes in bank portfolios. Creativity and innovation have been among the
distinctive characteristics of Japanese economic and urban growth.
The focus of growth began to shift later to the Asian tigers: Hong Kong, South Korea, Singapore and
Taiwan. What is noteworthy is that the overall pattern of growth was similar in these countries.
Singapore and Hong Kong being city states were, of course, somewhat different and had to exhibit
concentrated growth. But South Korea and Taiwan also concentrated on specialising in
manufacturing. Like Japan they first specialized in labour intensive low technology goods production
and then began to move up the technology chain. While Korean manufacturing production was
concentrated in large manufacturing conglomerates, that of Taiwan was spread over a large proportion
of small and medium enterprises. However, they both exhibited a strategy of concentrated spatial
development in urban concentrations, Seoul/Pusan in Korea and Taipei/Kaohsing in Taiwan. The
Seoul and Pusan metropolitan regions accounted for almost 70 per cent of South Korea's urban
population by the mid 1970s (Mills and Song, 1979 p.188). Each of the Tigers adopted an
exportoriented and outward orientated strategy, which also necessitated heavy investments in key
transportation and communication links with the rest of the world. The economic activities located in
these cities were as connected with the rest of the world as with their hinterlands, if not more. This
common heavy spatial concentration in these countries, Japan, South Korea and Taiwan, can perhaps
also be attributed to the fact that they are among the most densely populated countries in the world.
Given the success of the tigers, it was then the turn of the cubs, the South East Asian countries of
Thailand, Indonesia and Malaysia during the 1980s. Once again, the pattern of concentrated heavy
investment was repeated in the metropolitan cities of Bangkok, Jakarta and Kuala Lumpur. The
orientation here was also export oriented and hence, again, heavy investment had to be incurred in
transportation and communication links, and in urban infrastructure.
The urban development pattern that emerged in Asia was that of concentrated development around
coastal regions of each country. Moreover, the transportation links that grew between these coastal
cities in terms of economic linkages of communication, transportation and commerce, contributed to
the emergence of trans-border virtual urban corridors. In fact, a look at the Asian urbanisation pattern
as it has emerged reveals a long almost continuous urban coastal corridor stretching from Tokyo to
Sydney, through Seoul, Taipei, Shanghai, Hong Kong, Kuala Lumpur, Singapore and Jakarta
(Douglas, 1998).
Interestingly, early Chinese economic and urban growth in the 1980s and 1990s was also the result of
a similar strategy: export-oriented labour-using manufacturing located in the coastal areas; initially in
and around Shanghai and in the whole Pearl River Delta Region. Once again, infrastructure
investment was concentrated in the Special Economic Zones and, as in the other countries, heavy
rural urban migration ensued. Given the size of China it is, of course, not easy to portray its pattern of
urbanisation. Until the 1990s, rural urban migration was heavily constrained through the urban
residence permit system, which has since been loosened considerably. Although there is a great
degree of debate on the actual level of Chinese urbanisation, in 2000 it was somewhere between 30
and 36 per cent. It now has about 90 cities with more than 1 million population. The Chinese
authorities have a clear priority objective of accelerating urbanisation to absorb surplus labour from
rural areas into more productive urban systems (Webster, 2005).
In contrast to this common experience, the Indian strategy was almost a mirror image of the East and
South East Asian strategy. The ethos was of dispersed development: urban concentration was
frowned upon and actively discouraged; and the import substituting inward oriented manufacturing
approach persisted till the 1980s. Investment in infrastructure, particularly urban infrastructure has
been of lower intensity. As I have documented elsewhere, unlike the East and South East Asian
countries, during the period of accelerating economic growth in India in the 1980s and 1990s, although
industrial growth was high, manufacturing employment and urban population growth decelerated
(Mohan and Dasgupta, 2004). Despite being a peninsula with a long coastline, there was no attempt
to concentrate economic activity in the coastal areas: in fact growth in the old concentrations of
Calcutta, Madras and Bombay (now Kolkata, Chennai and Mumbai) slowed down in the 1980s and
1990s while, interestingly, inland cities such as Bangalore, Hyderabad and Delhi prospered. There
have perhaps been few such examples of inland cities growing faster than coastal cities and regions.
The fulcrum of global economic growth has now shifted to the large economies of China and India. In
the case of China, with the initial growth impetus having come from the coastal zones, the emphasis is
now shifting to inland cities. Although economic growth has perhaps now got more concentrated
regionally in India, there is still little evidence of strategy shifting to the promotion of greater urban
concentrations. So the export led, coastal urban growth that has been characteristic of Asian urban
growth in the last 50 years can now be expected to move inland in the large land masses of India and
China. Such a pattern of urban growth will probably necessitate higher degree of infrastructure
investment - both intra-urban and inter-urban in order to ensure international economic
competitiveness.
IV. Emerging issues for the next wave of Asian urbanisation
By all accounts Asia has coped well with the unprecedented magnitude of urbanisation that it has
experienced in the last 50 years. The Asian habitat pattern has been transformed over a historically
brief time period: an Asian is now almost as likely to be found living in an urban area as in a rural area,
with a high probability of being found in a city of significant size. Because of the particular economic
strategy followed over much of Asia, its cities are engines of economic activity exhibiting ever
increasing productivity gains and prosperity. This has enabled Asia to finance its urban infrastructure
investment without excessive international borrowing. In fact, the financial surplus that the region is
now exporting to other regions of the world has come as a bit of a surprise, given its own resource
needs for continuing investment, particularly in the infrastructure needed for further urbanisation.
Although the rate of urbanisation will, no doubt, slow down overall, the magnitude of urban population
accretion in Asia over the next 30 years will be roughly equal to that experienced in the last 50 years.
In fact, this next wave of urbanisation in Asia will be the largest in magnitude over any 30 year period
in human history. The key question that arises is whether the region will have enough resources to
cope with this magnitude of urbanisation. It is the most populous countries of China, India and
Indonesia, along with Pakistan and Bangladesh, which will undergo large urbanisation during this
period, even though the pace of change may well be faster in other countries such as Vietnam, Laos
and Myanmar.
China seems to have invested adequately in infrastructure already and there would appear to be little
doubt of its ability to generate enough internal resources to finance its investment needs over the
foreseeable future and its ability to attract external resources if needed. In fact, given the current
magnitude of its current account surplus, coupled with the flow of external savings into the country,
and the large magnitude of forex reserves invested elsewhere, it has enough of a cushion to meet
most if not all its needs in the foreseeable future. As I have discussed, the change that can be
expected is that of a change in focus towards inland cities. The question that then arises is whether
these cities will be productive and competitive enough to produce the economic surpluses necessary
for their continued sustainability. The attainment of such productivity will necessarily mean greater
inter-urban infrastructure investment, so that these cities are well integrated with their coastal cousins.
Furthermore, given the information technology and communication revolution, along with the secular
decline in per unit air transportation costs, they can now also be connected to the rest of the world
without intermediation of the coastal cities. But this would also mean that they will need to specialize
more in service industries, rather than in manufacturing; the latter could be handicapped in global
competitiveness because of excessive transport costs. Thus, it is certainly the case that much greater
inter-urban infrastructure investment will be necessary to make these cities competitive. It would
appear that this has already begun in China in all the various facets of infrastructure: road, rail, airports
and telecommunications.
The Indian story is somewhat different with relatively low attention being paid to urban development
over the years, and slowing urbanisation over the last quarter century. There have been systematic
policy biases against labour using industrialization, location of industries in urban areas, and against
urban concentrations. Correspondingly, India has severe problems in both the management and
financing of cities. With the new found economic resurgence of India, a result of consistent economic
reforms since the early 1990s, the importance of urban infrastructure investment has finally begun to
occupy the minds of key policy markers and a new "National Urban Renewal Mission" has been
launched. However, the biases against labour using manufacturing remain in overall economic policy
making, in the industrial regulatory regime, labour regulations and in urban land policy. Thus
employment growth in manufacturing remains low. As I have argued elsewhere, these polices could
have contributed significantly to the slow down observed in Indian urbanisation over the last quarter
century (Mohan and Dasgupta, 2004).
Industrial competitiveness in India has now recovered after the shock of competition having been
absorbed through significant financial and business process restructuring in Indian firms. The export
orientation of Indian industry at large has also increased significantly in recent years. On average
(since 2000-01), about 14 per cent of sales of Indian firms is now exported and this proportion
continues to grow, as compared with 7 per cent in 1991-92. Consequently, the continued high growth
of the Indian economy would get strengthened if the efficiency of Indian cities improves. It is
noteworthy that those cities that have shown great economic vigor over the last decade in India, such
as Delhi, Bangalore, Hyd