A significant trend in recent years seen in India is that while large manufacturing companies are shifting in rural areas, the smaller ones are clustering in urban areas. Critically discuss the reasons and consequences of such trend.

The LPG reforms of 1991 together with giving boost to the industrialization also gave thrust to urbanization. Industrialization and urbanization had established a symbiotic relationship.
Off late a trend is witnessed where in large industries which amount to almost 80% of manufacturing output are shifting to rural areas but the small ones which are the major Job creators are clustering in urban areas in search of infrastructure. The reasons for shifting of large industries to rural areas are
Push Factors

  • High cost of Mega cities: The increasing cost of cities is compelling the large industries which are largely self sustaining to move to rural areas to reduce the cost of production.
  • Infrastructural bottlenecks: Indian cities are suffering from deficiency in infrastructure. This is adversely affecting the efficiency and productivity of the Industries.
  • Availability of land: The booming real estate sector in urban areas has put the availability of land for expansions at risk.

Pull Factors

  • Government providing various tax incentives to aid industrialization in rural areas.
  • Availability of the labor at cheap cost in rural areas.

Consequences of this trend

  • Revival of rural economy as industrialization would act as a catalyst for the economy.
  • It will reduce the migration to megacities thus reducing pressure on them.
  • It may provide for addressing the issue of under employment and disguised unemployment of agriculture.
  • Reduced disparity between urban and rural areas


  • Unplanned urbanization would make the process of urbanization messy.
  • As economic viability of agriculture is reducing, it may adversely impact the agriculture. This will threaten food security of the country.

World Bank calls India’s urbanization as messy. In order to address these adverse consequences government has brought schemes like Nation Rurban mission to aid the development of rural areas through area based approach.


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