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BW Businessworld

The Rank And Order

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There is a near perfect correlation between urbanisation and prosperity across nations."
Edward Ludwig "Ed" Glaeser, economist at Harvard University

A country with more cities and urban areas is usually better endowed in most fields of well being — from income to cultural stimulation. The pace of urbanisation in Indian cities is very rapid, and emerging cities are increasingly exploring new dimensions. The growth of cities in the country owes much to the combined magic of human ingenuity and industriousness.

That's a reality the India City Competitiveness Report (CCR) 2011 reveals. The report ranks 50 most prosperous Indian cities on the basis of various parameters for competitiveness, as mentioned in Michael Porter's microeconomic model. Measuring city competitiveness is all about rating one city against another on its economic strength. The CCR is an attempt to provide insights on how Indian cities can use their competitiveness to tap their potential.

There have been no major changes in the top rankings this year. This time also, the national capital, Delhi leads the nation. Interestingly, Delhi is numero uno across all parameters — be it factor conditions, demand conditions, competitive factors, and institutional infrastructure. This is largely attributable to the sharp improvement in the physical infrastructure in the city, thanks to the Commonwealth Games 2010, and a resulting improvement in the business environment. That said, no new projects have been completed in Delhi during this year.

Mumbai is ranked second in all categories except institutional infrastructure where it has been ranked sixth. While the financial capital is close to Delhi in many parameters, it is miles behind in physical factors — a fact that the rising slum population in the city will vouch for. Bangalore and Kolkata are ahead of Mumbai on this count.

Despite being the leader, Delhi loses out on innovation. While Mumbai and Chennai lead in innovation, the surprise entries are Chandigarh (Rank 3), Kozhikode (5) and Kochi (6). Delhi is a distant number 10 here. While Delhi is the leader in demographics, it is a distant sixth in income distribution.

...and comes No. 4 in business incentives.                            The city scores the highest in demographics.
(BW pics by Tribhuwan Sharma)

During the year, both Mumbai and Bangalore have moved one rank up to the No. 2 and 3 slots. Pune has moved up four ranks to be at No. 4, while Gurgaon has risen seven ranks to be in the Top 10 at No. 6. In the process, Nagpur has come down to No. 13. The only non-metro (barring Gurgaon and Noida) to make it to the Top 10 is Jaipur. The biggest fall has been recorded by Dhanbad, which fell from No. 21 in 2010 to No. 50 this year.

The game changer for India will come from some of the Tier 2 and Tier 3 cities, which are doing better in many parameters than the metropolitan cities. One city that seems to be giving a run for their money to the big cities is Indore — it has been ranked ninth in factor conditions. While its overall ranking has gone down to 20 from 14 in 2010, it has been ranked third in communications after Delhi and Mumbai. In financial factors, it is ranked seventh — ahead of Bangalore and Ahmedabad.

Miles To Go, Still
Despite the ranks, India's cities are still way behind cities in the developed world. They need to move from factor-driven competitiveness to efficiency-led and finally innovation-led economies. For change to happen, cities will have to invest heavily in improving infrastructure initially. While Delhi, Mumbai and Bangalore are known globally, much needs to be done not only to improve the competitiveness of these cities, but also to create awareness to attract investment.

The small towns of today will need to emerge as hubs of trade and business in the coming years. However, to ensure that they keep up with the growth, they will need to invest in physical infrastructure and urban services.

Some of that is already happening. Over the past decade, many cities have changed sharply, improving the quality of life they provide. Some of that change is due to the initiatives taken under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Among other things, it has resulted in better quality public transport in most cities. As a result, today governments see cities as dynamic entities that result in greater productivity.
The India City Competitiveness Report (CCR) 2011 evaluates 50 cities. It assesses the cities' overall performance in context to their financial, social, business performance, technology, foreign companies' involvement. etc. According to the Census of India 2011, a city is a town with a population of more than 100,000. The 2011 Census identified 475 cities with a population of more than 100,000 and 53 cities with over a million people.

The city competitiveness report 2011 has used data published by the government of India through reports disseminated by various ministries in different operational areas, government-funded research organisations and other organisations. The study uses hard data of 2011, which is collected from reliable sources to eliminate the possibility of personal bias or sampling errors.

The Toppers
India's Top 5 cities to do business in
Rank 2011: 1
Overall score: 78.02
Rank 2011: 2
Overall score: 72.93
Rank 2011: 3
Overall score: 65.28
Rank 2011: 4
City: PUNE
Overall score: 64.27
Rank 2010: 5
Overall score: 62.75

Source: Institute For

The Scores
Competitiveness is measured on four pillars: factor condition, demand conditions, ‘related and supporting industries' and ‘context for strategy and rivalry. These factors are quantified on the basis of sub-indices, which are based on sets of indicators.

There are six sub-indices for factor conditions, two for demand conditions, two for competitiveness and two for institutional infrastructure. Each of these sub-indices is further classified to dig deeper on the variables that influence the cities. In all there are about 800 indicators. For instance, the population, literacy rate, transport conditions, factories operating, etc. of cities helps understand the importance and distinctiveness of each city.

The data collection effort was affected by lack of appropriate data. The research team resolved it by calculating data for those cities using other dependent variables. Some variables that were easy to locate were population, education-related data and basic health and crime data. However, data pertaining to industries, technology and infrastructure was hard to source.

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

(This story was published in Businessworld Issue Dated 19-12-2011)