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Many of these facts will be known to readers. The reason they are being mentioned here is that Sarjapura is in Karnataka while Hosur is in Tamil Nadu, an example of how economic agglomerations are increasingly spilling across the administrative boundaries of states, creating a new challenge not just for city planners but also for Indian federalism.

Another example is the growth of the privately-developed Sri City in Andhra Pradesh, which is also very close to the border with Tamil Nadu, and just 75km away from Chennai.

A milder version of this challenge has been the growth of our cities outside their administrative boundaries. My colleagues at Artha Global had nearly a decade ago used satellite data to show how many cities, big and small, have spilled outside their formal limits, engulfing not just suburbs, but also smaller settlements that continue to be mistakenly identified as villages in our official statistics. Much of this spatial growth—in Mumbai, for example—was still within the confines of a state. That is no longer a given.

Flashback to 1955. The Indian government had responded to an upsurge of subnational demands by setting up a committee to suggest ways to reorganize Indian states. India eventually accepted the system of linguistic states, but the committee had also considered the idea that "administrative units could be made to conform to natural economic regions."

This option was rejected because economic regions change shape over the years, and would thus be an unstable basis for a federal design. And a common language would be a more powerful binding force than economic exchange.

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The report was written at a time when the Indian economy was largely a collection of regional economies. Even most large business houses did not have a national footprint.

A report on industrial licensing by economist R.K. Hazari in 1966 showed that business groups tended to invest in the regions their promoter group came from. The pattern of public sector investment was designed to break such regionalism.

A lot has changed since then. The growth of the Indian economy has expanded the footprint of Indian businesses and made many of them national, if not international.

The old economic regions have also changed, creating a new economic geography that differs from what is described in old school textbooks, with textile mills shown mostly in Mumbai and old public-sector steel towns marked out on the national map.

But more important is the fact that economic regions are no longer boxed in by state borders. It is likely that two changes have supported this trend: the gradual build-up of road and rail infrastructure since work started on the Golden Quadrilateral and the introduction of India's Goods and Services Tax (GST) in 2017.

The first has gradually brought down the cost of moving goods, while GST has done away with excise posts at state borders that hindered internal trade. The bullet train project between Mumbai and Ahmedabad will likely create even tighter economic integration between the areas around these two cities in Maharashtra and Gujarat, respectively.

Better roads as well as an integrated national market have made it easier for companies to build national rather than regional supply chains.

In a paper published in July 2023, Bibek Debroy and Devi Prasad Misra showed that "internal trade appears to be growing at twice the pace of growth of GDP (gross domestic product)" and that "this enhanced economic integration is attributable to the transpiration efficiency gains that have accrued after the introduction of the… GST."

The growth of urban agglomerations beyond state borders should be seen as part of this process of economic integration. The immediate question is of managing such urban economic zones that are not entirely under the jurisdiction of one state government.

Supporting their growth through more investments in physical and social infrastructure as well as integrated urban planning will require a new form of cooperation between the concerned states.

There is another challenge that may arise only in the future, but which has implications for Indian federalism. What if people living in a cross-border urban agglomeration find that their economic incentives are better aligned with others living in the same economic zone across the border rather than with people from distant districts of their own state? This is not a live issue right now, but worth pondering.

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Earlier this month, there was an interesting idea proposed on X by Saurabh Chandra—that Bidar, a town in north Karnataka, needs better connectivity to Hyderabad, the capital of Telangana, so that Bidar could become like Hosur or Sri City, connected to a dynamic business hub across the state border. Bidar is 140km from Hyderabad but 675km from Bengaluru. It is the same underlying logic.

We should expect more of such cross-border integration of economic activities as well as urban growth. It is an inevitable result of the harmonization of India's internal market. How to manage such areas could become a tricky—but hopefully not heated—issue for Indian federalism in the years ahead.