Taking the South Indian state of Tamilnadu as an example, the paper tries to analyse the recent urbanization experience and problems faced by this region by focusing on its different regional economies. Special attention is given to the lower strata of the urban system; in this context, the existence, importance and potential of indigenous, long-standing elements of the space economy are stressed. Traditional rural market systems are a case in point. It is argued here that such informally organized market systems are ideally suited to the conditions, needs and problems of the regional society. Hence, they may be regarded as part of a spatial framework for regional policies "from below" which focus on the basic needs and participation of the rural masses.