Urbanisation and Economic Growth: Some Insights from the Himalayan State of Sikkim

Sikkim has experienced rapid urbanisation and industrialisation, particularly since the implementation of the North East Industrial and Investment Promotion Policy in 2007 (NEIIPP 2007). Though urbanisation and economic growth are inextricably linked, previous research findings on their causal relationships appear to be contradictory. Increased urbanisation/industrialisation seemed to enrage the Sikkimese, not because of revenue generation or environmental concerns, but because of their disproportionate share of employment opportunities in comparison to outsiders. Using secondary data, this article investigated two critical research questions: (a) Whether urbanisation is a result of or a cause of economic growth; and (b) Has Sikkim’s industrialisation, largely fuelled by the NEIIPP 2007, benefited locals? The causality test revealed a unidirectional relationship between the two, with urbanisation causing economic growth. Despite attracting migrant labour, Sikkim’s increased industrialisation/urbanisation has significantly reduced poverty and unemployment. JEL Codes: H20, L59, O10, O15, O25, R23