Iron brought in a change of economy, the characteristic feature of advanced type of agriculture. In the Ganges Valley and in the Malwa region iron led to the rise of urban areas. Both Brahmanical and Buddhist texts are full with reference to cities during the middle of the first millennium BC and at sites like Ahichhatra, Varanasi, Kausambi, Sravasti and Ujjayini the evidences of Iron age urbanization is available.
By the middle of the 6th century BC some of these settlements had reached the proportions of urban centres. This suggests that for the first time since the decline of the Harappan civilization a substantial agricultural surplus which could sustain such urban centres had emerged. The use of silver and copper coins in large numbers during this period implies considerable trade and commerce. Some of the urban centres were also seats of political power as suggested by defence arrangements in some of them. Thus a political system with definable territorial units as its bases had developed by this time.