Population Does Not Cause Poverty, Bad Economics Does

Why Indian Cities are Rich, Villages Remain Poor, and Policy Keeps Getting It Wrong

November 11, 2025

The idea that India’s large population is the reason for its poverty is still taught in economics classes, but it falls apart under basic scrutiny, says Sauvik Chakraverti, a libertarian thinker and economist, in “Free Your Mind: A Beginner’s Guide to Political Economy.” If wealth is created by humans working, producing and exchanging with each other, how can more humans cause poverty?

Every city in the world is proof of the opposite, Chakraverti argues, as cited by ThePrint. The following is an explained version of his arguments.

Wherever people gather in large numbers, be it Delhi, Mumbai, London or New York, they produce wealth. There are more businesses, more cars, more phones, and more millionaires in crowded cities than in empty rural landscapes. Why? Because cities are where trade, specialisation and cooperation happen at scale.

Humans are the only species capable of complex economic exchange. We don’t live by producing everything ourselves. Instead, we specialise. Some grow food, others teach, some repair machines, and others design clothes. Each person focuses on what they do best, then trades the results of their work with others. This system of exchange, made possible by markets, is how wealth is created. It’s the foundation of economics.

Now imagine being told to stop trading and become entirely self-sufficient. You’d have to grow your own food, sew your own clothes, treat your own illnesses, and build your own house. The more you try to do everything, the worse your life becomes. That’s true whether you’re an individual, a family, a village, or a country. Self-sufficiency spreads your time and energy thin, moving you away from what you’re good at and forcing you to do what you’re bad at. That isn’t development. That’s regression.

Ask a group of children what they want to be when they grow up. Their answers will be things like astronaut, doctor, teacher, actor. You won’t hear a child say they want to grow up to be self-sufficient. It’s uneconomic. If it doesn’t make sense for a person or a family, it certainly doesn’t make sense for a country. But for decades, Indian policy has insisted on glorifying self-sufficiency, particularly in rural areas. The result is that we’ve starved our cities of resources while wasting money on village-level development that doesn’t create long-term wealth.

The reason cities create wealth is because they allow something economists call the division of labour. When enough people live close together, they can specialise in different jobs and still find enough demand for their services. For instance, a Thai restaurant needs a certain number of people to stay in business. It can’t survive in a village with a few hundred residents, but it can thrive in a city of ten thousand. The bigger the population, the more niches people can fill, like dentists, delivery drivers, graphic designers and lawyers. That’s how dense populations produce prosperity.

Urbanisation isn’t just a global trend, it’s the basis of economic growth. Today, over half the world’s population lives in cities. In India, the number is much lower, just around 30 percent. But look closer, the richer states like Maharashtra and Gujarat have urbanisation rates close to 50 percent, while poorer states like Bihar and Assam have barely reached 10 percent. The pattern is clear. More urbanisation, more wealth.

Civilisation itself comes from the word civitas, Latin for “city.” The earliest civilisations were city-based. Trade among cities in the Mediterranean, ports like Lothal connecting to Harappa and Mohenjo-daro, all formed part of a network of economic life. Cities were built around trade routes, marketplaces, and shared services. They were the centres of innovation and opportunity. Destroying them or letting them rot weakens the entire economy.

But instead of investing in cities, India has left them to decay. A global survey of cities once ranked Indian urban centres among the worst in the world. One reason for the collapse of our cities is bad planning, especially in transportation. Without proper road networks, cities become bloated. This is called “primacy,” when one big city swells out of control because smaller towns aren’t connected or supported. Delhi, Mumbai, and Bengaluru grow more crowded because they absorb the population that could have gone to satellite towns, if only those towns had the roads and services to support them.

The British, for all their flaws, understood the value of urban links. They built hill stations and made sure these were well connected to nearby cities. Darjeeling linked to Calcutta, Ooty to Madras, Simla to Delhi. Today, such connections barely exist. Look at Singapore, a once unimpressive port town that became an economic powerhouse in just a few decades by investing in infrastructure and trade. If India’s 400-odd towns and cities had decent roads, they too could grow into economic engines. Instead, most of India’s urban population is crammed into a few overloaded metros, while dozens of potential mini-Singapores remain cut off.

India is not overpopulated. Take a train or a flight, and you’ll see open land for miles. Our population density is lower than that of Japan, Germany or the Netherlands. Those countries are more crowded, yet their cities function well. Why? Because they invested in roads and public services. Urban overcrowding in India is caused not by too many people, but by too few viable cities.

To blame India’s poverty on its people is harmful. It leads to policies that punish citizens for existing. It tells families to have fewer children. It tells young people they are a burden. It makes traffic deaths look like population control. That is a dangerous and immoral philosophy.

The truth is, human beings are the most powerful resource a country can have. Every person is a mind with the capacity to learn, trade, specialise and produce wealth. Teaching them otherwise numbs the mind. The real problem is not population. It’s bad economics.

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