Institute for Social and Economic Change
Working Paper: 292
Do Large Agglomerations Lead to Economic Growth?
Evidence from Urban India
The cities and towns of India constitute the world’s second largest urban system besides contributing over 50 per cent of the country’s Gross Domestic Product (GDP). This phenomenon has been neglected by the existing studies and writings on urban India. By considering 59 large cities in India and employing new economic geography models, this paper investigates the relevant state- and city-specific determinants of urban agglomeration. In addition, the spatial interactions between cities and the effect of urban agglomeration on India’s urban economic growth are estimated. The empirical results show that agglomeration economies are policy-induced as well as market-determined and offer evidence of the strong positive effect of agglomeration on urban economic growth and support for the non-linearity of the Core-Periphery (CP) model in India’s urban system.