One of the fastest-growing economies in the world, India has grown at a rate of above seven percent, over the last decade. Much of this growth can be explained by the growth of its cities. Cities have emerged as economic powerhouses that have defined job growth within the country. While prosperity has increased in cities, so have the challenges they face. The challenges are of inequality, unplanned urbanisation, mass migration, poverty, unemployment and the like. Some cities have even witnessed a fall in their quality of life. The challenges that our cities face can be managed if looked at from the lens of competitiveness.
Competitiveness depends on the long-term productivity of a region. A competitive city is a city that successfully facilitates its firms and industries to create jobs, raise productivity, and increase incomes of its citizens over time. The City Competitiveness Report 2017 represents the competitive performance of 50 Indian cities across different parameters. It uses the framework of Michael Porter's Diamond Model, which defines competitiveness as the sum total of factor conditions, demand conditions, the context for firm strategy and rivalry, and related and supporting industries. Bengaluru has emerged as the most competitive city in India. Mumbai and Pune closely follow. Patna, on the other hand, has emerged as the least competitive city.
The analysis brings out some interesting insights. First, the population of a city has a direct bearing on its level of competitiveness – big Indian cities are also the most competitive. This suggests that either the population acts as an active resource (as a factor of production) and positively impacts the competitiveness of a city or that competitive cities tend to be more attractive to the general population. The literacy rates in these cities are substantially higher than India's national average. This, coupled with their high population densities, creates the best demand conditions in the country, thus adding to their competitiveness levels.
The presence of quality educational institutions in the big cities helps them attract the best talent from all over the country. This, coupled with job opportunities they offer, help them retain such talent. The presence of such diverse talent helps in sustaining the growth, productivity and economy of these cities. Sound financial infrastructure and relatively higher financial literacy levels further add to their competitiveness. But a large population is not always a boon. It creates challenges pertaining to the movement of people and goods and in the provision of basic services. Governments respond to such problems by improving service delivery and spending on infrastructure. It is not a coincidence that all these cities have operational Metro rail networks and some of the best hospitals and airports in the country. These factors significantly impact the competitiveness of cities.
Second, prevailing environmental conditions impact the competitiveness of a city by affecting its labour productivity. While other big cities like Mumbai, Kolkata, Chennai and Hyderabad have managed to retain their competitiveness levels, Delhi has of late witnessed a drop in competitiveness mainly because of its worsening environmental landscape. A similar loss was also witnessed by the neighbouring cities of Noida and Gurugram.
Third, the level of industrialisation in a state impacts the competitiveness of its cities. In India, most of the highly competitive cities belong to a small group of industrialised states (including Maharashtra, Tamil Nadu, Gujarat and Karnataka) while the least competitive cities belong to less industrialised states like Jharkhand, Bihar, Chhattisgarh and Jammu and Kashmir, among others. In other words, industrialisation as a policy tool is required to make cities from less industrialised states more competitive.
In the short run, some cities may witness substantial improvements in their competitiveness levels. This may be because of an improvement in their factor conditions and demand conditions. But in order to sustain or further improve their competitiveness levels, they must act on the other two pillars of Porter's Diamond model, i.e., context for strategy and rivalry, and related and supporting industries. It is worth noting that these two pillars are directly related to the level of industrialisation, which cannot be increased overnight. So, the policymakers in the less industrialised states should look at industrialisation as a long-term solution to make their cities more competitive. Cities in the states of Gujarat, Karnataka, Maharashtra, and Delhi perform well on these pillars. At the city level, old industrial and trade hubs such as Surat, Mumbai, Ahmedabad and Delhi also perform well on these pillars.
Lastly, the level of cleanliness and sanitation and competitiveness are positively correlated. Cities in Madhya Pradesh, which have shown exceptional cleanliness performance of late, have seen a rise in their competitiveness levels. Indore was in the news recently for deciding to name and shame people for spitting on roads. Tier 2 and Tier 3 cities like Chandigarh, Vadodara, Coimbatore, Surat, Mysore and Rajkot have witnessed a similar fate. The big cities like Delhi, Bengaluru, and Chennai have not performed well on this front. A massive population, urban sprawl and limited public infrastructure are the possible reasons. Our cities have focused only on a few parameters of development and have ignored the others. For instance, despite being the most competitive cities in the country, the performance of big cities on certain parameters (such as environment, cleanliness and administration) is not up to the mark.
This probably signifies a lack of clear vision, as also an integrated development agenda. Planning and development should take place with a clear set of priorities. One of the ways to tackle the problem at hand would be to strengthen municipalities by giving them more political and financial powers. China, which has some of the world's most competitive cities, owes its success to such devolution of power. Participation of the local population in the planning and development process is another important aspect which is ignored in India. How India strengthens its cities will determine the strength of India's growth story in the future.
(Amit Kapoor is chair, Institute for Competitiveness, India. Aditya Laumas, researcher at this Institute, contributed to the article. The views are strictly personal.)