The nature of urbanisation is premised on how we define urban. Ontologically, just as the concept of modernity or development, urban is also a debatable concept which entails diversity. Nevertheless, most of the countries have evolved their own definition of urban and rural–urban classification constitutes an important framework for collecting and compiling population data. While ‘urban’ is often specifically defined, ‘rural’ is treated simply as the residual category. This chapter also demonstrates that rural and urban classification is highly significant for local governance and development planning in the Indian context. Constitutional amendments have also given local bodies a legitimate role in the federal structure of the country. While rural–urban classification is the task of the Census of India, state governments are responsible for granting municipal status to urban centres. This chapter examines the criteria and limitations of the rural–urban classification followed by the census, its congruence with the dynamics of state-accorded municipal/non-municipal status and some implications for municipal governance and urban development in India.