Relation of infrastructure and urbanization in India (how best to invest in infrastructure)

Economic development and urbanization are positively associated. One way to maintain the balanced development in the economy is to keep a stress on ‘urbanization’. Urbanization transfers resources from rural to urban centers and simultaneously, brings resources, through rural-urban linkage, to the rural economy for its development. It is considerably true that urbanization becomes the key for reconstructing the entire economy, as it changes the sectoral composition of output, income and employment. Its progress more or less depends upon the advancement of urban economy, which rides on the expansion of industrialization in the country. But industrialization or the level of industrial development relies on the accessibility of resource base, level of technology, explicit and implicit government intervention and the availability of infrastructure in the economy (Henderson, 1999). In this context, the paper explores the relationship between infrastructure and urbanization in the Indian economy and draws policy implications for similar developing economies. To explore the relation between infrastructure and urbanization, the paper is develops an econometric model. For empirical prognostication of the same, the work uses the macro economic databases of Indian economy from year 2001–10.