D Bidari - Professor and Head (RTD), Research and Training Division, NIRD, Hyderabad

India's economic development is inextricably linked to that of India's rural economicdevelopment. A large majority of Indians live in relatively small localities and are engagedin farming or some activity related to farming. In 2001, the average Indian lived in avillage of about 4,200 people; 72 percent of India's total population was classified as rural,and 58 percent of workers were engaged in agriculture. Just 11 percent of Indians lived inlarge cities of 1 million or more residents (Haub and Sharma 2006).The core problems of widespread poverty, growing inequalities, rapid populationgrowth, growing and rising unemployment, among others, find their origins in thestagnation and often retrogression of economic life and development in rural areas. Mostsocial and economic indicators consistently show that rural areas compare unfavourablywith urban areas. It is at the rural level that the problems of hunger, ignorance, ill healthand high mortality are most acute. Therefore, if development is to take place and becomeselfsustaining, it will have to be rooted and concentrated in the rural areas.In practice there are two main methodologies to define rural. the first methodology is touse a geopolitical definition. First, urban is defined by laws as all of the state, region, anddistrict capitals (centers), and by exclusion all the rest is defined as rural. Countries likeColombia, El Salvador, Dominican Republic, and Paraguay follow this methodology. Inall of these countries urban population is defined as that living within the Cabeceramunicipal the municipality's head or center. The drawbacks of this methodology areobvious: populations that live outside the geopolitical limit of a city (specially in agrowing city) are miscounted as rural; while population living in tiny municipalities insparsely populated regions is miscounted as urban.The other popular methodology is to use observed population agglomeration to define'urban'. In this case populations that live within an area where contiguous households formpopulations large than, say 2,000 inhabitants are considered urban, while by exclusion therest is defined as rural. This methodology seems more attractive because it establishes aclear threshold; unfortunately this threshold varies widely around the world. (Anriquez &Stamoulis, 2007).Many Indians who live in relatively less populated areas are classified as rural becausetheir communities are highly dependent on agriculture and lack the population densityrequired for the official urban designation. In general, India classifies communities asurban if they have a least 5,000 people; a population density of at least 400 people persquare kilometer (1,000 per square mile); and less than 25 Percent of the male labor forceengaged in agriculture. Accordingly, many of the 16 percent of Indians living in placeswith 5,000 to 19,999 people are classified as rural (Haub and Sharma 2006).