Small Towns and Mid-Sized Cities

The economic role of smaller cities between villages and megacities, why they matter for development, and the challenges they face.

Discussions of urbanisation often focus on megacities like Mumbai, Delhi or Shanghai. But much urban growth happens in small towns and mid-sized cities, sometimes called secondary cities.

Why they matter

Link between village and city: small towns provide markets for farm produce, supplies for farmers and services like schools and clinics for surrounding villages.
Absorbing migrants: they give rural people access to non-farm jobs without moving far from home.
Poverty reduction: research by Luc Christiaensen and Ravi Kanbur suggested that growth in secondary towns may reduce poverty more than growth in big cities in some countries, because poorer rural people can more easily access nearby town jobs.
Cheaper living than big cities.

India’s census towns

India has many census towns: places that meet urban criteria for population and non-farm employment but are still governed as villages. Their number grew sharply between 2001 and 2011. Because they are administered as rural areas, they may lack urban services like sewerage and planning.

Challenges

Limited finance and capacity of local governments.
Poor infrastructure, such as water, sanitation and roads.
Few large employers, limiting job opportunities.
Losing young people to bigger cities.

Opportunities

Improved roads, digital connectivity and remote work can help smaller cities attract businesses and residents. India’s growth in tier-2 and tier-3 cities, such as for retail, technology services and start-ups, reflects this.

The market town

A small town sits at a crossroads surrounded by farming villages. Farmers sell vegetables at its market, buy seeds and fertiliser from its shops, and send children to its college. When a new highway links it to a big city, it attracts a food processing factory, creating jobs for villagers who can commute daily. The town becomes a bridge between rural and urban economies.

Thinking only big cities drive growth

Big cities are productive, but small and mid-sized towns connect rural areas to markets and offer nearby jobs. Balanced urban growth can reduce poverty more widely.

Key takeaways

Small towns and mid-sized cities link villages to wider markets.
They offer non-farm jobs close to rural homes and can reduce poverty effectively.
India's census towns grew sharply but are often governed as villages.
Limited finance and infrastructure are challenges; connectivity creates opportunities.