Friday, January 20, 2012

India Vs China - the role of urbanization

The Economist points out that in 2011 China's urban population surpassed its rural population. This stands out in stark contrast to 1980, when less than a fifth of its population lived in cities, a smaller proportion than India, whose urban population share in 2011 was just above 30%.

The rapid pace of urbanization, especially manufacturing led urbanization (where factories are located in cities or its urban agglomerations), has been the primary driving force behind China's spectacular economic growth of the past three decades. In fact, it is no coincidence that China's pace of urbanization picked up sharply since 1995 (as observed from the graphic). This coincided with a rapid spurt in the economic growth.

In contrast, India's urban population has grown slowly, a reflection of its rural-centric growth strategy. State and central governments in India will have to redress this skewedness in priorities in order to push the economy into a sustainably higher growth trajectory.

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