During one of the panel discussions at last week’s Sankalp Forum, an interesting conversation emerged. Two early-stage VCs (Seed Fund’s Mahesh Murthy and Kae Capital’s Sasha Mirchandani) were making the point that it wasn’t a case of missing ‘investors’ as much as it was a case of missing ‘entrepreneurs’. Of course, their perspective was that of traditional investors/VC funds looking purely at a certain multiple of financial returns. Murthy also quipped “Don’t expect us to invest in someone working on reducing migration from villages to cities.” At which point, Basecamp‘s Kavitha Reddy jumped up and asked: “Why not? Reducing village migration means less people pouring into Dharavi’s slums.”
Murthy didn’t get a chance to respond but I bet this is what he’d have said: “A primary thing we look for in funding startups is how viable the business model is, how big the market is, and our assessment of the entrepreneur’s ability to succeed. If any social good comes as a result of the business (like say, reduced village migration rates), that would be purely a side-effect.” An impact investor (e.g. Acumen Fund) might have a different answer but that’s not the point I’m trying to make.
On my bus ride back to Bangalore, as I tweeted fun insights from Angela Saini’s Geek Nation, found a relevant stat attributed to Lavasa’s Gulabchand: “400 million Indians will migrate from rural to urban areas in 40 years.” A similarly-sized migration in Europe was done in 1000 years. I wondered about the source and accuracy of this stat. A Twitter follower soon posted a link to this Welcome to the urban century ISB/World Economic Forum article – which cites a 300-400 million migration in, not 40 but 25 years! My train of thoughts took me to a dated CK Prahalad article where he boldly forecast that India needed to build a minimum of 500 new cities urgently in order to keep pace with and provide a better quality life to its migrating people. This Rediff article captures the gist and context in which he made that statement.
Against the backdrop of these staggering migration trends, efforts to reduce migration (like rural tourism, rural BPOs, rurbanization, etc.) seem disproportionate to the magnitude of the problem. ISB’s Reuben Abraham writes thus:
There’s always a tendency to romanticize the rural life and vilify the city. The irony is that the people who romanticize tend to either be wealthy and/or live in cities. I find this strange, given the absolute centrality of cities to economic progress and well-being. According to the urban economist Richard Florida, close to 70 percent of global GDP and 85 percent of all innovation comes from 40-odd urban mega-regions. New York City alone has a GDP of about $1.2 trillion, making it the 12th or 13th largest economy in the world. Although cities are traditionally seen as a consequence of economic growth, they are in fact a cause and consequence of economic growth, and you cannot have robust economic growth without rapid urbanization.
In 1800, 2 percent of the world was urban. In 1900, it was 14 percent urban. In 2008, the world crossed the 50 percent threshold. By 2050, it is expected that the world will be 80 percent urban. Both India and China are witnessing the greatest migrations in human history as hundreds of millions leave the countryside for urban areas. In India alone, 300 million to 400 million people will migrate to cities over the next 25 years. The challenges of managing this process are obvious, but there are opportunities as well. Urban areas are expected to produce 70 percent of India’s GDP and 85 percent of all tax receipts by 2025.
If urban areas will represent 70 percentage of India’s GDP by 2025, it will obviously require more than 30% of Indians to live and work there. Migration to cities is increasingly sounding as inevitable as death and taxes. If you think of the migration phenomenon as a movement from areas of low economic opportunities (villages) to areas of high economic opportunities (cities), it really shouldn’t surprise us anymore.
Not everybody in rural areas would have an equal proclivity (or motivation) to move to cities. For some, the quality of livelihood would have to deteriorate to desperate levels before they’d contemplate a migration. For others, cities simply represent a possible realization of their dreams – much larger community, energy and entertainment of big city life (think Bunty Aur Babli or the migrant stories described in Anand Giridharadas’s India Calling in search of the Great Indian Dream).
ISB’s Abraham also notes that people tend to associate developing country cities with horrifying slums (some truth to this of course) but quickly points out that cities like San Francisco were once shantytowns as well. The onus is on urban planners, the whole gamut of Indian government bodies (state and central), and private enterprises to ensure that nation building equates to building cities (both old and new) that can support the greatest migration trends in India’s history. Seriously, if India’s cities could grow without the proliferation of Dharavi-like slums, would we still be talking about the migration problem?