The Rurban Constellation: Spatial Economics and the Making of the Second Republic

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The Rurban Constellation: Spatial Economics and the Making of the Second Republic

Ejaz Ghani

September 22, 2026

Standard economic geography assumes a linear demographic transition from rural agriculture to urban industrialisation. India’s spatial trajectory, however, aggressively defies this orthodox blueprint. Utilising longitudinal plant-level data (ASI) and enterprise-level surveys (NSSO), this paper identifies a profound
spatial decoupling driven by severe factor market distortions. Paralysed by fragmented urban property rights and land assembly costs, capital-intensive formal manufacturing is actively de-urbanising to the rural periphery, leveraging national highway infrastructure for spatial arbitrage. Conversely, functionally locked
out of formal banking, the labour-intensive informal economy is rapidly hyper-urbanising to forge the physical proximity required for informal credit and localised agglomeration.

Furthermore, this urbanisation diverges regionally, manifesting as capital-driven “engineered” clusters in leading industrial states and remittance-fuelled “organic” hubs in lagging agrarian states. To harness its demographic dividend and achieve the $30 trillion developed-nation status of Viksit Bharat by 2047, India must dismantle the rigid rural-urban binary. This paper proposes the structural blueprint for a Second Republic: proposing a “Transitional Hold-Harmless” fiscal mechanism to break the current political economy deadlock, underpinned by a new “4F” governance architecture—Foundations, Functions, Finances, and Functionaries—designed explicitly to formalise, finance, and empower the missing rurban middle.

STATEMENT

January 17th, 2024

On 10th January 2024, CPR received a notice from the Ministry of Home Affairs cancelling its FCRA status. The basis of this decision is incomprehensible and disproportionate, and some of the reasons given challenge the very basis of the functioning of a research institution. This includes the publication on our website of policy reports emanating from our research being equated with current affairs programming.

During the tenure of our suspension, we sought and obtained interim redress from the honourable Delhi High Court and will continue to seek recourse in all avenues possible.

This cancellation comes after a decision to suspend the FCRA status in February 2023. These actions followed an Income Tax “survey” that took place in September 2022. The actions have had a debilitating impact on the institution’s ability to function by choking all sources of funding. This has undermined the institution’s ability to pursue its well established objective of producing high quality, globally recognised research on policy matters, which it has been recognised for over its 50 years’ existence. During this time the institution has been home to some of the country’s most distinguished academics, diplomats and policymakers.

CPR firmly reiterates that it is in complete compliance with the law, and has been cooperating fully and exhaustively at every step of the process. We remain steadfast in our belief that this matter will be resolved in line with constitutional values and guarantees.

From the President, CPR

Working Papers

The Rurban Constellation: Spatial Economics and the Making of the Second Republic

Ejaz Ghani