Shifting City Classifications

---

India's urban classification is a patchwork of definitions, from Census-based statutory and census towns to RBI's tiered system and the Ministry of Finance's city grading. This fragmented approach influences policy decisions, urban planning, and financial allocations. But are these varied hierarchies keeping pace with India’s rapid urbanization? The inconsistencies in classification continue to shape urban development and the push for a more cohesive, data-driven urban policy.

Source: World Bank

India presently uses multiple definitions to classify its urban centres. The first and most prominent definition is the one by the Census of India. It classifies towns in two categories, one based on legal statute and the other on a mix of population size and economic functions. All places with a municipality, corporation, cantonment board or notified town area committees are termed as statutory towns. All other places with a minimum population of 5,000, at least 75% of the male main working population engaged in non-agricultural pursuits, and a density of population of at least 400 persons per sq. km are termed as census towns.

Another definition is used by the Ministry of Finance (MoF) to determine the financial liabilities of the Union government to its employees. Based on the recommendations of the Pay Commission, the MoF puts forth its classification of cities/towns to grant House Rent Allowance (HRA) to central government employees. The cities are classified as X, Y and Z based on their population.

	Table 1: Pay Commission’s City Classification
Classification of cities	Population
X	50 lakhs and above
Y	5-50 lakhs
Z	Below 5 lakhs

Finally, the Reserve Bank of India (RBI) also classifies Indian cities on the basis of population and ranks cities as Tier-I to Tier-VI. They are also classified as Rural, Semi-Urban, Urban, and Metropolitan. RBI uses this classification for various decisions relating to allowing the opening of full branches, mobile branches, administrative offices, back offices and other activities related to banking.

		Table 2: RBI’s Classification and Census classification
Population	Centre Classification	Tier Classification
1,00,000 and above	Urban (10 lakh and above classified as Metropolitan)	Tier I
50,000 to 99,999	Semi-Urban	Tier II
20,000-49,999	Semi-Urban	Tier III
10,000-19,999	Semi-Urban	Tier IV
5,000-9,999	Rural	Tier V
Less than 5,000	Rural	Tier VI

Urban Hierarchy and Urban Policy

These three classifications are also used for decisions related to various government schemes, including those relating to urban development. For example, the Ministry of Urban Development is implementing the urban component of the Swachh Bharat Mission in all the statutory towns (based on the Census). The number of cities per state to be covered under the Smart Cities mission also took into consideration the number of statutory towns in the state.

In order to understand the relevance of classifications with respect to the Smart Cities Mission, we examined how the original list of 98 Smart Cities matches up to some of the hierarchies being used in India and two urban programmes.

	Table 3: Overlap of Hierarchies with Smart Cities
Programme	Percent of Smart Cities that are also
JnNURM	41
AMRUT	90
Affordable Housing	91
Tier 1 cities (RBI)	92
Metropolitan Centers (RBI)	36
X + Y Cities (MoF)	57

There is a wide variation in the overlap of the original 98 cities under the Smart City Mission with other schemes and definitions. While juxtaposing the various urban schemes and hierarchies in the above table, one can see that the selection of cities is not consistent on any one set of definitions. Most programmes do not rely on any one specific classification system, usually creating their own selection criteria. Smart City Mission used its own weighted selection method and hence was able to have a broad coverage of cities across the states.

Source: GEO Facts

In such a scenario, the hierarchies and their categories can serve two important purposes in India’s case. First, if updated periodically and correctly, it should capture the fast-paced process of urbanisation. Second, its urban hierarchy should inform its urban policies.

Cities differ from each other on many accounts, including social, economic and cultural. To make meaningful policy decisions, it is important to classify cities in a way that can allow for such differences to be recognised in proposing policy-based solutions.

The decision on where a given urban centre lies within a hierarchy and whether it can be promoted to a higher level (or demoted to a lower level) of urban hierarchy has significant influence on the dynamics of growth in future periods. It also has a bearing on the policies and schemes that it can attract.

It is important that we think of rational, scientific and Indian context-specific classifications of urban centres for consistent urban policy design and decisions.