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India’s Rapid Unplanned Urbanisation Creates Opportunities and Challenges

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India had the second highest urban population in the world in 2012 and will be amongst the fastest growing urban populations globally between 2013 and 2020 in absolute terms. This urbanising trend holds significant investment and consumer market potential but also creates challenges like over-crowding, pollution and rising crime levels.

India’s Urban and Rural Population: 2000-2020

Urban vs. Rural Population in India 2000-2020

Source: Euromonitor International from national statistics/UN

Note: Data for 2013-2020 refer to forecasts.

  • India's urban population grew by 2.8% annually between 2000 and 2012, compared to the 1.6% per year rise in the total population, thanks to rapid economic growth and strong rural-urban migration in order to look for better job opportunities and improving lifestyles. However, this trend is unplanned;
  • In 2012, India's urban population stood at 388 million - the second highest urban population in the world. However, the country's urban population accounted for only 31.6% of the total population in the same year compared to the global average of over 50.0% of the total population;
  • The government's definition of urban areas excludes peri-urban areas – immediately adjoining urban areas which are in a process of urbanisation but are formally outside urban boundaries and urban jurisdictions - contributing towards this low proportion of urban population;
  • Two of India's metropolitan cities feature in the world's largest urban population by city. Mumbai is the most populated city in India and had the fourth largest urban population by city in 2012 at 12.5 million people, while Delhi – the country's capital city – had the eighth largest urban population by city at 11.1 million people.


India's unplanned urbanisation is creating opportunities and challenges:

  • As economic activity tends to be concentrated in urban areas, urbanisation trends offer a huge consumer market potential as urban consumers have a higher purchasing power. For example, in 2012, annual consumer spending per household in Delhi and Mumbai stood at Rs495,614 (US$9,279) and Rs434,805 (US$8,141) compared to the national average of Rs245,244 (US$4,592);
  • Urbanisation presents a significant investment potential for companies seeking new markets because it creates consumer demand for housing, household goods, urban infrastructure and transportation, healthcare, education, and recreation. Marketers will also find opportunities in the increasing number of single person households;
  • Unplanned urbanisation causes over-crowding leading to a growing concentration of people living in slums and unstable settlements. Housing shortages are also created. For example, the capital city of Delhi had 11,215 persons per sq km in 2012 compared to the national average of 413 persons per sq km;
  • Rapid urbanisation also creates challenges like pollution, health problems and rising crime levels due to the pressure on limited urban amenities. In 2012, India was the third largest polluter in the world with 2.0 billion tonnes of CO2 emissions from the consumption and flaring of fossil fuels;
  • Chronic underinvestment in infrastructure is a big problem in the country and one of the biggest weaknesses of its business environment. Infrastructural spending is not keeping up with the growing needs of cities where a large proportion of the population lacks access to water supply and sanitation facilities;
  • Large-scale migration from rural areas is causing a lack of job opportunities in urban areas increasing the incidence of poverty and inequality. India's unemployment rate, at 8.9% of the economically active population in 2012, while not very high masks the presence of a large informal sector in urban areas.

Top 10 Cities with Highest Population Density Globally: 2012

Top ten cities with highest population density globally in 2012

Source: Euromonitor International from national statistics/UN


  • To reap the benefits of urbanisation, policy makers will have to tackle the problem of over-crowded cities by increasing infrastructural spending. “Rurbanisation”, a concept coined by Gujarat state's Chief Minister, which entails providing urban conveniences and civic and infrastructure facilities to rural India is an attempt to stem migration and deal with the challenges of urbanisation;
  • By 2030, India's urban population is forecast to reach 631 million, an increase of 2.6% per year over the 2013-2030 period compared to the 1.1% annual rise expected in the total population. The urban population will account for 41.8% of the total population by 2030;
  • According to the United Nations, by 2025, Delhi (32.9 million) and Mumbai (26.6 million) will be the second and fourth largest urban agglomerations in the world. Urban agglomerations refer to the population in cities and other expanding smaller satellite towns and villages nearby that may be outside the administrative boundaries.
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