Disparities in Urban Growth: A Size Class Perspective

Not all cities grow the same way – or at the same pace. India’s urban landscape tells a story of stark contrasts: a handful of large cities absorbing millions of people and economic resources, while hundreds of smaller towns stagnate or barely grow. This divergence in growth rates across urban centres of different sizes is one of the most significant – and under-discussed – aspects of urbanisation in India. It raises a fundamental question: why do large cities keep growing while small towns fall behind, and what does that mean for the country’s urban future?

How India classifies its urban centres
The dominance of Class I cities
The stagnation of smaller towns
What happens to the towns left behind
Migration patterns and why they favour large cities
Economic factors driving the disparity
Agglomeration economies
Infrastructure gaps
Ruralisation of industry
The challenges for urban planning
What balanced urban growth could look like

How India classifies its urban centres

To understand the disparity in growth, it helps to first understand how urban areas are categorised. According to the Census of India, urban centres are classified into six size classes based on population. Class I cities have populations of 100,000 or more and are the dominant urban hubs – commercial, industrial, and administrative centres that drive economic activity at the regional and national level. Class II cities (50,000-99,999) serve as regional centres. Class III towns (20,000-49,999) typically act as local trading or administrative hubs. Class IV towns (10,000-19,999) are smaller local centres, while Class V and VI towns have populations below 10,000 and are the most rural in character.

This classification is not merely administrative. It shapes how resources are allocated, what infrastructure gets built, and which towns attract investment and migration. The gap between the top and bottom of this classification has widened considerably over the decades.

The dominance of Class I cities

The numbers tell a clear story. According to the Census of India 2011, 264.9 million people – constituting 70% of India’s total urban population – lived in Class I urban agglomerations, even though these cities made up a relatively small proportion of total urban settlements. The number of Class I cities grew from 394 in 2001 to 468 in 2011, and within them, 52 metropolitan cities alone accounted for more than 42% of all urban residents.

What makes this more striking is the long-term trend. Research published in the journal Sustainability found that the number of million-plus cities in India grew from just 5 in 1951 to 53 in 2011, with their share of the total urban population rising from 18.81% to 42.62% over the same period. These cities command a disproportionate share of India’s economic output – India’s top 10 cities account for just 9% of the population but nearly 28% of GDP. Class I cities have, in essence, become the economic spine of urban India.

Crucially, their growth rate has shown a degree of relative stability over successive census periods, unlike smaller towns which show much greater volatility – alternating between periods of growth, stagnation, and even decline.

The stagnation of smaller towns

In stark contrast, towns in the Class III to Class VI range have struggled to maintain meaningful growth. A 2024 study in Demography India found that India’s urban centres are showing an increasing share of stabilising and declining towns, with the growth trajectory shifting backwards – especially among small and medium-sized towns. The study also noted that some urban centres are now actually losing population, a phenomenon previously unheard of in India’s generally growing urban landscape.

A study on Gujarat published in Frontiers in Sustainable Cities found that regional disparity in urban population distribution became more pronounced between the 2001 and 2011 censuses, with the Gini coefficient for urban population concentration rising from 0.6760 to 0.7222. This means urban population is growing more rapidly in large cities than in small and medium towns – and the gap is widening, not narrowing.

What happens to the towns left behind

Smaller towns typically depend on a narrow economic base – local agriculture, small-scale trade, or a single industry. This limited diversification makes them vulnerable. When a dominant local employer closes or when young workers leave for better prospects elsewhere, the town has little to fall back on. Research on rural-urban migration shows that urban jobs typically offer salaries two to three times higher than comparable rural or small-town work, and provide year-round income rather than seasonal earnings – a powerful incentive to relocate. As the working-age population leaves, smaller towns are left with ageing demographics, declining tax revenues, and deteriorating infrastructure, all of which make recovery harder.

Migration patterns and why they favour large cities

Migration is one of the most direct drivers of the size-class disparity. Census data from the Observer Research Foundation shows that between 1971 and 2001, rural-to-urban migration contributed roughly 19-21% of all additions to India’s urban population each decade – a consistent but modest share. The bulk of this migration flows not to smaller towns but directly to large urban agglomerations where jobs, services, and social networks are already concentrated.

According to the International Organization for Migration, India’s growth in agglomeration economies is most evident in million-plus cities. In recent years, employment growth in industry and services has expanded not just in primary metros like Delhi, Mumbai, and Chennai, but also in secondary million-plus cities such as Bengaluru, Hyderabad, Pune, Ahmedabad, and Jaipur. Smaller Class III and IV towns simply cannot compete with this concentration of opportunity.

This creates a self-reinforcing cycle: large cities attract migrants, which expands the labour pool and consumer market, which attracts more investment, which creates more jobs, which draws more migrants. Smaller towns, lacking the initial critical mass, are bypassed entirely. As one policy analysis puts it, India faces an “urban destination deficit” – too few cities are capable of absorbing migrants, leaving most of the gravitational pull concentrated in a small number of megacities.

Economic factors driving the disparity

Beyond migration, several structural economic factors explain why growth rates differ so sharply across size classes.

Agglomeration economies

Large cities benefit from agglomeration economies – the productivity gains that arise when businesses, workers, and infrastructure cluster together. Firms in large cities have access to a wider labour pool, better logistics, larger markets, and proximity to other firms in complementary industries. These advantages compound over time, making large cities progressively more attractive relative to smaller alternatives. Research on India’s urban system confirms that India’s economy is metropolitan-centric, with big cities controlling a significant share of national GDP and investment.

Infrastructure gaps

Large cities, precisely because they generate more revenue and attract more political attention, tend to receive a greater share of public investment in roads, transport, hospitals, and utilities. Smaller towns are frequently caught in a catch-22: they need better infrastructure to attract investment, but they cannot attract investment without better infrastructure. A Centre for Social and Economic Progress working paper highlights that India’s historically capital-intensive and often urban-restricted industrial policy has contributed to manufacturing shifting away from cities – but this shift has benefited rural regions more than small towns, leaving Class III-VI towns in an awkward middle ground.

Ruralisation of industry

Interestingly, a significant share of India’s manufacturing has drifted toward rural areas rather than secondary towns. Data from the Centre for Social and Economic Progress shows that 51% of manufacturing gross value added is now attributed to rural regions – a reversal of earlier trends. This means smaller towns have not gained from industrial decentralisation the way one might expect. They remain without the employment anchors that could stabilise and grow their populations.

The challenges for urban planning

The concentration of urban growth in Class I cities creates serious planning challenges. India’s Economic Survey 2025-26 described the country’s urban story as one of “unfinished promise,” pointing to supply-side constraints in land, housing, and transport as key sources of stress in large cities. While they continue to grow, large Indian cities struggle with overcrowding, long commutes, housing shortages, and environmental degradation. The benefits of urbanisation are not translating into proportional improvements in quality of life or global economic competitiveness.

Meanwhile, the neglect of smaller towns means that a large portion of India’s geographic territory and population remains outside the arc of urban development. The Demography India study argues for a holistic, decentralised urban planning approach – one that empowers smaller urban units with adequate infrastructure and economic opportunities to achieve balanced growth and reduce development inequalities. Without targeted intervention, the existing disparity is likely to deepen.

Outlook Business notes that for India to meet its Viksit Bharat 2047 ambitions, states must play a leading role in driving urbanisation – and this requires narrowing the development gap between large cities and the hundreds of smaller urban centres that are currently being left behind.

What balanced urban growth could look like

Addressing the size-class disparity requires deliberate policy choices. Economists and urban planners have pointed to several directions: creating employment anchors in secondary towns by incentivising labour-intensive manufacturing; investing in connectivity infrastructure so smaller towns can function as satellites of larger economic corridors; and reforming urban governance so local bodies have the fiscal capacity to improve services and attract residents. One policy framework suggests identifying cities and towns across the country with the latent potential to grow into vibrant urban centres, and channelling targeted infrastructure investment into them – rather than continuing to pour resources into already-congested megacities where returns are diminishing.

The goal is not to stop large cities from growing, but to build a more distributed urban system where Class II, III, and IV towns can also play meaningful roles – absorbing migration, generating employment, and delivering services to the populations they serve.

What do you think? Given that Class I cities already concentrate the majority of urban population and economic output, should India focus its planning resources on making these large cities more liveable – or is investing in the development of smaller towns the more sustainable path forward? And with smaller towns facing both outmigration and infrastructure deficits simultaneously, what would it actually take to reverse their decline?

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Table of Contents

How India classifies its urban centres 🔗

The dominance of Class I cities 🔗

The stagnation of smaller towns 🔗

What happens to the towns left behind 🔗

Migration patterns and why they favour large cities 🔗

Economic factors driving the disparity 🔗

Agglomeration economies 🔗

Infrastructure gaps 🔗

Ruralisation of industry 🔗

The challenges for urban planning 🔗

What balanced urban growth could look like 🔗