Rural-Urban Migration, Urbanization, and Wage Differentials in Urban India

Abstract

Indian economy had passed through a phase of very rapid economic growth since early 2000s which was accompanied by the structural changes in both output and employment. The share of GDP in agriculture, industry, and service sectors has changed from 24% to 14%, 27% to 28%, and 49% to 58%, respectively, over 2000–2001 to 2011–2012. The share of employment in agriculture decreased from 61% to 49%; in industry, it increased from 15.5% to 24.3%; and in services, it increased from 22.5% to 26.7% during the same period (see Parida 2015). For the first time in the history of India, an absolute decline (23.7 million) in agricultural employment was noticed during 2004–2005 and 2009–2010, of which 22.5 million were unpaid family workers (see Appendix Table 8.1). These are the workers whose marginal productivity is very low. The substantial increase (about 25 million) in nonfarm employment (16 million in industry and 9 million in services) during this period, on the other hand, clearly indicates a Lewisian (Lewis 1954) transition in India. On the demand side, agricultural distress (see Abraham 2008), mechanization in agriculture (see Himanshu 2011 and Mehrotra et al. 2014), and rising agricultural/rural wages (Gulati et al. 2013 and Mehrotra et al. 2014) were the major factors leading to the decline in agriculture workforce. On the supply side, withdrawal of female workers from agriculture (Mehrotra et al. 2014) and increasing participation in education in the recent years (see Kannan and Raveendran, 2012; Rangarajan et al. 2011; Thomas 2012; and Mehrotra and Parida 2017) would sustain this rural to urban migration process for next few years in India.