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BW Businessworld

The City Slickers

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Cities are wealth-creating centres, playing a vital role in a country’s economic development. Their competitiveness vis-a-vis other cities within the country and outside is crucial to their ability to attract investment. Indian cities (and their regions) are expanding in population and gross domestic product (GDP) at a rapid pace. By 2030, for instance, the Mumbai Metropolitan Region will have a population equal to that of Canada’s. Similarly, the National Capital Region (NCR) will have a GDP larger than Portugal’s. Policy-makers and corporates, among others, are forever grappling with the decision of which cities to invest in, and when.

But even though cities remain the vital cogs in an economy, simply establishing some new cities and overlooking the pitfalls that urbanisation brings in its wake can be disastrous.

In India, as it is elsewhere, population is moving from rural to urban areas in search of opportunities and a better quality of life. The influx creates enormous pressure on cities, leading to a shortage of power, water,  housing and transportation, with concomitant pollution, sewage, poor public health and educational standards, rising unemployment and poverty.
The India City Competitiveness Report 2012, prepared by the Institute for Competiveness India and the Institute of South Asian Studies (National University of Singapore) has evaluated 50 Indian cities. The resultant competitiveness index is built on the underlying principles of Michael E. Porter, a renowned Harvard Business School professor. His Microeconomic Competitiveness — or Diamond Model — helps assess cities from various dimensions.
THE HUB: Mumbai retains the second spot in the rankings
(BW Archive)

This year’s index has Delhi retaining its status as the country’s most competitive city. Interestingly, this is the third time that the city has grabbed the numero uno position. Next up is the country’s financial hub, Mumbai, which has also maintained its position and is stable in second place. Chennai holds the third rank, Hyderabad comes fourth, Kolkata fifth, Gurgaon sixth, Bengaluru seventh, Noida eighth, Pune ninth and Ahmedabad is at the 10th place.
There have been quite a few changes in the top 10, with many improving their position and a few slipping. Chennai has moved from fifth in 2011 to third this time around, Hyderabad from eighth to fourth, Kolkata from seventh to fifth and Noida from 11th to eighth. By the same cue, Bangalore has slipped from third to seventh, Pune from fourth to ninth and Ahmedabad from ninth to 10th. Raipur replaces Goa this year in the rankings.
A significant fact highlighted by the index is an improvement in the rankings of NCR cities: Noida, Gurgaon and Faridabad. The last, in fact, moving up a whopping 19 spots since 2011 to finish 29th. Many tier-2 and tier-3 cities have also put in a good showing. Cities such as Nagpur (13th to 11th), Chandigarh (15th to 12th), Coimbatore (22nd to 14th), Indore (20th to 18th), Mysore (24th to 21st) and Bhubaneswar (35th to 22nd) are on the growth path and just waiting for the right set of opportunities.
To capture the level of competitiveness and the associated prosperity of cities, the index comprises four principal categories, which are further divided into 12 sub-categories wherein the latter consist of the indicators that gauge competitiveness. The four categories are infrastructure conditions, demand conditions, competition and institutional infrastructure. 
A comparison of the results across them shows Delhi topping in infrastructure, demand and competition but coming tenth in institutional infrastructure. Hyderabad, surprisingly, is No. 1 when it comes to institutional infrastructure. Again, Chennai outscores Delhi when it comes to innovation, while Mumbai is far ahead in financial muscle. While the top 10 cities are where everyone wants to live, work and do business in, the 11-20 bracket is where the potential rests. Dominated by cities from western and southern India, this segment is hot on the heels of the top 10 and requires the right strategies to break into the big boys’ club. In 21-30 range, Mysore has moved up four places since last year to rank 21st. At 23rd and 24th positions are Vadodara and Rajkot respectively, both cities in Gujarat. 

THE INDIA CITY COMPETITIVENESS REPORT 2012 evaluates 50 cities. It assesses the cities’ overall performance in the context of infrastructure (financial, physical, communication, administrative, human capacity and innovation) demands (demographic and income), competition (intensity and diversity of firms and business incentives) and institutional infrastructure (supplier sophistication and institutional support). As per Census 2011, habitations with a population of more than 100,000 are called cities. The Census identified 475 cities with a population of more than 100,000 and 53 cities with over a million people.

The report has used data from reports disseminated by various ministries in different operational areas, government-funded research organisations and other organisations. The study uses hard data collected from reliable sources to eliminate the possibility of personal bias or sampling errors.

Each of the 12 sub-categories is further classified to dig deeper on the variables that influence cities. In all, there are about 800 indicators. For instance, the population, literacy rate, transport conditions, factories operating, etc., help understand the importance and distinctiveness of each city.

Constructing the index had eight steps: developing a framework, identifying the parameters, collecting both secondary and current data, analysing various components of factor conditions, exploring demand conditions, examining business opportunities, investigating threats and opportunities and computing the competitiveness index. The cities have been selected by combining both qualitative and quantitative research techniques.

NCR holds sway even as many tier-2 and tier-3 cities show a dramatic improvement
The ranks notwithstanding, Indian cities have plenty of catching up to do with their West counterparts. They need to move from factor-led competition to efficiency-led models and, finally, transition to an innovation-based culture. For that, cities will have to invest heavily in infrastructure. While Delhi, Mumbai and Bangalore have already made a mark on the global stage, the smaller cities will need to carve out a niche for themselves. Some of that change is already under way. Many cities have improved the quality of life they offer; some of that is due to the measures taken under the Jawaharlal Nehru National Urban Renewal Mission, which has resulted in better public transport.
(This story was published in Businessworld Issue Dated 27-08-2012)