Paper short abstract:

Rising aspirations among youth have resulted in the rise in demand for high schools, colleges, and other educational institutes. Thus, small towns with better educational infrastructure grew faster during 2001-11, and India's second urban turn is driven by aspirations rather than farm distress.

Paper long abstract:

India's second urban turn posited as an outcome of agricultural decline and rural distress, which has forced villagers to shift into the non-farm economy in search of livelihood. However, small-town economies are struggling due to low productivity, weak infrastructure, and penetration of multinationals, hardly offering a meaningful alternative to rural youth. Thus, mere economic determinants cannot explain the growth of small towns, and these models should include the effect of rising aspirations, changing social preferences, and desires to become part of the 'urban middle class' among rural and semi-urban youth. It has led to higher demand for education that can impart skills required to be part of their globalized dreams. Thus, young adults are moving to nearby small towns with private schools, coaching institutes, and other educational institutes to educate and impart skills required for themselves to be part of the "urban" dream. Using Census and DISE data for more than 3,000 small towns in India, we show that the availability of a higher number of private high schools and access to colleges is the essential determinant of small-town growth across all categories. Further, we show that small-town growth increases if neighboring villages have a weak educational infrastructure. In contrast, the effect of other determinants, such as physical and financial infrastructure and the non-farm economy, is either statistically inconclusive or minuscule. Thus, rising aspirations are critical in explaining India's multifaceted puzzle of second urban turn.