The main question raised by the limited research on CTs with regards to governance and its relationship with urbanization is what we refer as to the “politics of classification” (Denis et al., 2012). This term encapsulates the idea that in most states urban local bodies are more restricted in their autonomy as compared to rural ones. In addition to the objective situation, a set of other factors could play a role when states decide to classify a settlement as rural or urban. Bhagat (2005) presents different elements of this cost-benefit analysis in favor of rural settlements, such as lower levels of taxation, cheaper electricity and the absence of urban bylaws and especially access to public schemes, in particular Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which is supposed to provide guaranteed unskilled employment of 100 days to each rural household, and Indira Awas Yojana (IAY), which provides subsidies for house construction to targeted poor households. As Sivaramakrishnan (2011) summarizes, “these places “in between” will be better off as panchayats since government funding and various other concessions available to panchayats are more in number and much larger”. On the other hand, once a settlement reaches a certain level of population and density, the need for networked urban services can only be financed through resources allocated to urban local bodies and there might be a certain need for planning. In other words, there is a form of cost-benefit analysis at work that can differ from one settlement to another and that can mobilize different types of actors and interests. This leads to the question of whether a process of municipalization is required to enhance governance.

Field research that has explored these dynamics in specific states or locations reinforces these hypotheses and opens up new insights. First of all, studying the case of Maharashtra, where a number of settlements that fulfill the criteria to become urban remain rural, the authors of a Tata Institute of Social Sciences study argue that the urban is a “contested terrain” (Bhide and Waingankar, 2011:43). They consider that the importance of agriculture and primary sector and the local and economic stakes also shape decisions to become urban. Guin and Das (2015a) in their state level study on census towns in West Bengal claim that the agrarian distress drives the increase of the rural non-farm sector and is the main reason for the enormous increase of census towns in the state. They also claim that the recent growth of new census towns in the state i.e. in 2011, does not follow any significant pattern (Guin and Das, 2015b). Some of them are scattered while others are located near small and medium cities unlike the earlier development close to the big city agglomeration.

Denis, Mukhopadhyay and Zérah (2012) refer to a number of field examples where political factors play a role in the governance boundary between the urban and the rural. They cite the case of Tamil Nadu, where in June 2004, 566 town panchayats (small urban local bodies) were reclassified as rural panchayats due to the resistance to urban taxation. These two examples point to the variations between states. For instance, declassification from urban to rural is possible in Kerala and in Tamil Nadu but not in all other states. In West Bengal and in Kerala, the two states with the highest number of new Census Towns, the provision available in the 74th amendment to have town panchayat or nagar panchayat for transitional urban areas does not exist, which might explain the slow process of municipalization (Samanta, 2014). Indeed, since the definition of urban varies from one state to the other, it requires probing the politics of classification in diverse sites. Finally, other examples provided in the Denis et al. (op. cit.) paper based on exploratory field work also show that social stakes can also influence the rural vs. urban classification.

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