According to Adam Smith, agriculture is the industry of the economy and manufacturing is the industry of the town. But, it changed its status from rural to urban in the last fifty years. However, the number of towns has increased from 2800 to 3600 and population has increased from 6 crore to 26 crore.
The proportion of population living in urban areas is about 25 per cent at the start of the new century against 16 percent in 1950-51. The people living in villages are over 10 lakh. CSO found that in 1970-71, only 62.5 percent net domestic product was generated in rural areas while more than 80 per cent population is residing there.
On the contrary, in urban area, about 20 per cent population is living with 37.5 per cent domestic product. In 1993-94, population in rural areas reduced by 6.7 per cent and they contribute only 31.0 per cent. Thus, change ratio has not much deteriorated overtime.