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UNESCO / MOST Discussion Paper No.57: "Industrial growth in small and medium towns and their vertical integration: the case of Gobindgarh, Punjab, India" by Amitabh Kundu and Sutinder Bhatia
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Management of Social Transformations - MOST

Discussion Paper No. 57

Industrial growth in small and medium towns and their vertical integration:
the case of Gobindgarh, Punjab, India


Amitabh Kundu and Sutinder Bhatia


The advocacy by many national and international organizations for a new system of management in developing countries, based on the principle of market efficiency and restructuring of the existing institutional system for urban economic development, often reflects an indifference towards the socio-cultural factors underlying the indigenous growth process. Implicitly, this supports the process of emergence of a few global cities, linked with the national and international market, often at the cost of small and medium towns. Also, it amounts to outright dismissal of the strength of local level institutions in the smaller towns that have emerged over a long period of time, sustaining their demographic and economic growth. Indeed, many of these towns have played a healthy role in the development of their regional economy. Unfortunately, the growth potentials of these towns are being ignored or underplayed in the present perspective of globalization.

The objective of the present paper is to argue that the market based urban system, dependent on a few metropolitan cities, need not be the only paradigm of development available to the countries of the Third World. A strategy for balanced urban development can be built only by taking into consideration the experiences of a large number of small and medium towns and their growth potentials. Further, it is important to identify the socio-cultural factors that characterise the growth process of these towns and design a support system to take full advantage of these factors or strengthen them. It is argued that a development strategy designed by taking into consideration these factors and the strength of local level institutions can indeed create a more dispersed urban system in the country. This would be an alternative to the global model of urban industrial development based on a few large cities.

Unfortunately, not many cross-country studies have been undertaken to examine the impact of the liberal economic policies on the pattern of urban development and analyse their implications. A lack of concern for the distortions in the structure of urbanisation and the differences in the socio-economic base of the urban centres in different size categories, is behind the advocacy of a uniform system of governance as a solution to the majority of urban problems in the Third World. As a result, most of the national governments as well as multi-national development cum banking agencies do not give adequate attention to the growth potential of the smaller towns, in designing their development strategy.

In the light of the above, the present study underlines the fact that a number of small and medium towns in India have shown high economic growth in recent years, despite their receiving no support from public agencies. It considers socio-cultural factors as extremely important in the development of small and medium towns, even when the market economy plays the dominant role in determining the spatial structure of development. A small town in Western India, Mandi Gobindgarh, located in the state of Punjab, has been taken as a case study. The choice of town is guided by the consideration that it does not enjoy any special governmental, locational or other advantage. Steel rolling and linked industries are so highly developed in this town that it is known as the Steel City of Western India. An attempt is made to identify the social and cultural factors that give it this distinctive character, responsible for its economic and demographic growth. The objective is to learn from the experience of Gobindgarh and make generalisations that could be helpful for the future development of many other similar towns and for developing a framework for balanced urban development in the country.



1. Small and medium towns in India under the new system of governance

2. Growth of small and medium towns and industrial dispersal in Punjab

3. Gobindgarh in a historical and regional context

4. Functioning of steel linked activities in Gobindgarh

5. Provision of Basic Amenities, Infrastructure and Municipal Governance at Gobindgarh

6. Conclusions and generalisations




In many less developed countries, urban industrial growth under programmes of economic liberalisation has been regionally concentrated. In a liberalised regime, only a few large global centres emerge, attracting much of the infrastructure and industrial investment. Most of the new manufacturing units seek locations around these global cities since this is both cost effective and administratively convenient. Considerations of commercial profitability and efficiency in governance do not inspire multinationals or the indigenous corporate sector to invest in small and medium towns.

Many governments in the developing world are trying to create a few "global centres of the future", to attract local and international investment. At preferred sites, land is being provided for upcoming industrial and commercial houses through government intervention and the activation of the land market. Steps are being taken to facilitate changes in land-use through simplification of legal and administrative procedures and the empowerment of the market to push "low valued" activities out of the city core. Efficient management and better governance are being advocated as solutions to most of the urban problems.

In line with the above perspective, a large section of planners and policy makers in India have argued that there exists no serious urban problem that can not be tackled through management solutions. All that is needed is to restructure the system of governance in a manner that the "standard reform packages" can be implemented. Reduction of public sector intervention, development of capital market for resource mobilisation, simplification of the legislative system to facilitate land use changes and re-location of economic activities are being advocated as the remedial measures (World Bank 1995, Expert Group on Commercialisation of Infrastructure 1996, World Bank 1998).

Management solutions are often advanced based on the assumption that urban centres throughout the country are similar in character. Urban problems are attributed to inefficiency of governance and imperfections in labour and capital markets created through administrative controls and governmental programmes. The solutions, thus, do not take cognizance of the differences in the social and economic structure of cities and towns.

A strong lobby is emerging, particularly in large cities, pleading for vigorous implementation of management solutions. It is advocating disbanding all zoning restrictions, building laws and bye-laws and making the city government relatively independent of state and central level controls. The new system of governance stipulates that the decisions regarding location of industries, change in land-use etc. should be taken expeditiously at the local level. The decentralisation of responsibilities for development planning, sought to be ushered in through the 74th Constitutional Amendment in India, is helping this lobby through the empowerment of local governments in large cities that have a relatively strong economic base. Efforts are also on to develop the capital market so that local level agencies can mobilise resources by issuing bonds and other credit instruments. This strategy, being operationalized with support from financial intermediaries, including the credit rating institutions, enables only the larger cities with a strong economic base to mobilise resources (Kundu et. al. 1999).

Many of the international agencies involved in the urban sector in developing countries have been strongly critical of the existing social and institutional structures that are supposedly having adverse effects on the functioning of the economic system. They argue that the only way to benefit from globalisation is to dismantle these structures that constrain the growth of economic activities and create new values and institutions that can back up the market based system of resource mobilisation and investment. To support this view, studies suggesting that the countries which have a similar value system as the North America or West European countries benefit more in the process of globalisation have been quoted.

Enthusiasm for the above package of solutions, both among international and national organisations, is the reason why issues concerning hierarchy of urban settlements are not receiving adequate attention among researchers. Understandably, given the disparity in economic strength of the towns and cities and their unequal access to capital market and public institutions, this pro-liberalisation perspective would enable the larger cities to corner much of the advantage from the system. Indifference on the part of research community on issues relating to urban structure, thus helps in institutionalising existing inequality and accentuating regional imbalances. Furthermore, this reinforces the bias against small and medium towns in the developing world.

The paper has six distinct sections. The first section analyses the growth pattern, economic base and level of basic amenities in small and medium towns in the country in a comparative perspective and highlights the biases against them that exist in the contemporary framework of development. It further discusses the changes in policy in recent years and examines whether the problems encountered by these towns would be aggravated in the post liberalisation phase. The second section examines the growth dynamics of small and medium towns in Punjab, identifying the socio-economic factors behind the relatively balanced urban-industrial development. The third section overviews the growth profile of Gobindgarh within a historical and regional perspective. The economics of steel rolling mills, problems in setting them up, their organisational structure, procurement of inputs and marketing finished products through a network of intermediaries etc. are analysed in the fourth section. The next section focuses on local governance and examines the extent to which the facilities provided by the Municipal Committee (MC) explain the profitability and growth of the enterprises in the town. The sixth and the final section summarises the findings, highlighting the factors behind the success of industrial enterprises and the growth of Gobindgarh. It also puts forward a few general recommendations and a development perspective for promoting the growth of small and medium towns and a balanced urban development in India.

About the Authors

Dr. Amitabh Kundu is Professor of Economics at the Jawaharlal Nehru University, New Delhi, India, where is teaching for the past thirty years. He has been Visiting Professor/ Senior Fellow at several universities in Europe and America and consultant to the World Bank, UNESCO (Division of Physical Heritage), the ILO and the Government of the Netherlands. His recent publications include "Urban Informal Sector" (ILO), "In the Name of Urban Poor" (Sage), "Inequality, Mobility and Urbanisation: China and India" (ed. Manak) and "Poverty and Vulnerability in a Globalising Metropolis: Ahmedabad" (ed. Manak).

Dr. Sutinder Bhatia is a Senior Reader at the Department of Economics, Khalsa Post Graduate (Evening) College at the University of Delhi. She has been teaching here for the last twenty-four years. Her Doctoral Thesis on "Economic Aspects of Bokaro Steel Plant" has been published as a book and is recognised as a significant contribution on the subject.

Acknowledgement goes to Mr. Bal Paritosh Dash and Sohel Firdos who assisted in data analysis and preparation of the report.

© UNESCO 2001

The opinions expressed in this publication are those of the author and do not necessarily reflect the views of UNESCO.


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