Growth, Inequality, Poverty, and Urbanization: the Case of India

In this chapter the analysis is pursued at three levels of disaggregation: states, districts, and cities with populations over one million. At the state level, urbanization does not show any significant impact on rural poverty, though it tends to reduce poverty in urban areas. Growth influences urbanization positively, while urbanization and expansion in non-agricultural activities both contribute to economic growth. Although urban inequality is not strongly correlated with urbanization and growth, the relationship is distinct. While poverty tends to decline, inequality rises in the process of growth and urbanization. The district-level data confirm a positive association between urbanization, work participation rate, percentage of workforce engaged in non-household manufacturing and services, literacy, growth, and inequality, though the degree of association is mild. Urbanization shows a strong beneficial effect on poverty at both the district and city levels.