City Competitiveness Report Preview 2009

8/3/2019 City Competitiveness Report Preview 2009

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India City Competitiveness Report 2009Report Preview


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INSITIIUTECOlv1 B ET I1 1 L 'V ';E N ES S

Contents

Institute for Competitiveness, India

Further Information


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IntroductionCities are economic microcosms. These fundamentalunits provide breeding ground for economic activitiesacross industries and services for a blend of peoplefrom all walks of life. An inevitable competition ensueswhen the multitude of visible and latent agents of thenumerous forces play interactively; thus excitingdimensions of successful and unsuccessful coping withsuch competition.Our states and nations are nothing but a summation ofour cities; thus it is not inordinate to assert that thestate of our cities reflects the state of our nations.

As Dr. Christian Ketels ofHarvard Business School,in an exclusive piece for this report, points out thatcities need to have a clear competitiveness agenda.And without cities that push for competitiveness, itis hard to see how a nation like India can make anysustained progress in its overall quest for highercompetitiveness.

The Indian City Competitiveness Report 2009 is anendeavour that evaluates the performance of cities oncompetitiveness. In conclusion it forcefully advocatesfor them appropriately traversing specific pathstowards economic and business success. In the process,it delves into nuances of the city performance; anddeciphers the strengths and weaknesses that pull orpush a city in the intended or unintended directions.The report serves twofold groups i.e., the corporate andthe government. We firmly believe that it will aidpolicy makers in improving city productivity and henceattracting more business and that it will be a boon tothe corporate sector, providing them invaluableinformation as they decide the future course of actionfor their businesses' growth path.

Urbanisation andMetropolitan GrowthThough India is no stranger to urbanization, itsboldfaced presence has been acutely felt in the pastcouple of decades or so. According to the 2001 censuscarried by government machinery, there are 35 citieswith a million plus population in India. Further notedthat,ll cities were added to the list between 1981 and1991, and 12between 1991and 2001. One could safely

surmise that soon enough wewill have 45-50 citieswith a million plus inhabitation. These cities havebecome epicentres of the Indian economic boom, havecreated clusters of urban agglomerations around themand have aided the growth of one or more satellitetowns as well. Case in point is the rise of Gurgaon,NOIDA, around Delhi; and Mumbai having suburbssuch as Thane. In fact, a detailed analysis of five largemetros, namely Mumbai, Delhi, Chennai, Hyderabad,and Bengaluru reveals that peripheral growth plays asignificant role in the growth of a city through urbansprawl. One can observe with interest that inevitably,these urban agglomerations become thrivingfull-fledged business centres.However, sustainability of these business epicentres is ahuge undertaking and responsibility. Historically, worldover booming business has traditionally broughtunmanaged population growth, bringing innumerablestresses on planning, resources and services. Aconcomitant boom is in vehicle numbers as well. Thusfar, our cities have not been able to provide sustainablesolution to any of these stresses. Sanjeev Sanyal,Founder and President of Sustainable Planet Institutecontends in this report that walking-the ultimate formof public transport needs to be infused into our cityDNA. Goingforward, building a public transportation ~grid conducive to walking is thus imperative. ~Furthermore, the needfor sustainability and nurturingan environmental conscience is also highlighted by RajLiberhan, Director, India Habitat Centre, in his articlein this report. He puts forth the alarming yethush-hushed nature of our anthropogenic use ofnatural resources and how it has lead to a lopsidedinvestment of time and money and consequentialunsatisfactory outcomes. Again, a new paradigm inour city plans needs to be implemented. Issues acrossthe spectrum-water pollution, energy, wastemanagement etc-have to be studied in tandem if ourcities are to survive and thrive in the future.

MethodologyWeused Porter's Diamond Model for our analysis; thisDiamond Model is the benchmark model used byleading academic institutions around the world. Basedon Professor Michael Porter's seminal work on strategyand competitiveness and taking off on the model usedbyWorld Economic Forum for its GlobalCompetitiveness, we evolved a robust model tomeasure competitiveness of Indian cities. After muchdebate and discourse, over 300 indicators were used toarrive at the final index for competitiveness, whereinextensive research was employed to collect the data.Unlike the World Economic Forum approach, we didnot input any subjective opinions; only hard data hasbeen processed.

Institute for Competitiveness - India City Competitiveness Report 2009


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enhancingprosperi ty I NST I TUT E fo rCOM PETIT IVEN ESSLoc al rul es a nd i nc en ti ve s t ha t e ncoura geinvestment and product ivity e .g. salaries.incentives for capital investments , intel lectua lproperty protectionVigorous local competition i.e., openness toforei gn and l oc al c ompe ti ti on ; sophi st ic at ion ofcompany operations

Access to high quality businessinputa i.e., natural endowments,human resources, capitalavailability. physicalinfrastructure, administrativeinfrastructure, informationinfrastruc ture, scienti fic andtechnological infrastructure

Related andSupportingIndustriesSophistica tion afloeal custom-e rs a nd n ee ds L e. , strict qual-i ty, safety, and environmentstandards

Ava il ab il it y o f supp li er s a ndlupporting IndustriesPre se nc e ofc l us te rs i ns te ad ofi sola ted firms

Microeconomic Competitiveness: The Diamond(Understanding Business Environment)

Sou rc e : P o rt e r, 1 990

The study uses hard data collected from reliable sourcesto eliminate the possibility of personal bias. To upholdreliability and validity, the data was collected frompublic organization and institutes engaged in collectionof statistics, information, and summations, Gaps indata are natural, the breaks in data are however, filledwith similar size or extrapolated data to prevent theany undue bias. Thus we evaded unfavourable ornegatively correlated data being introduced in theprocessing. A myriad of parameters were developedinto comprehensive indices. Care has been taken toprevent multi-collinearity with the use of PrincipalComponent Analysis to define the weights placed oneach indicator and sub index.Competitiveness is measurable when variousmicro economic factors are suitably aggregated to givethe final measure. Here, the measure forcompetitiveness is founded on four pillars ofdimensions that assess the competitive potential of acity: factor conditions, demand conditions, supportingconditions, and strategic context. Each indicator isgrouped into these four pillars and further into thesub-pillars to obtain a composite index forcompetitiveness through many sub-indices. Thereby,every indicator has been pivotal in determining thefinal index for competitiveness. However, everyindicator does not play an equitable role in theproductive potential of the city. Calibrated Weightshave been assigned to each indicator through PrincipalComponent Analysis; this eliminates overlappingcorrelation. Competitiveness hence becomes a balancedcomposite of various factors.

Competitiveness RankingsThe top ten, as you can see are the familiarcities-cities one would intuitively expect in the topten. What is rather interesting is their relative places

within the top ten and their performance insub-categories. Mumbai emerges as the victor closelyfollowed by Delhi, which is followed by Bengaluru,Chennai and Kolkata. Chennai, which is the only cityto make it into top 10 in every category, proves to bethe jack of all trades in the group. For comparison'ssake, according to the final scores, we can divide thecities into 4 'tiers'. The first group of cities at the topthat are very closely competitive include Mumbai,Delhi, Bengaluru, and Chennai. Next we have Kolkata,Hyderabad, Ahmadabad, and Pune neck-to-neck witheach other. The third tier is a larger group of citiesIaipur, ranked 9th to NOIDA, ranked 19th. The fourthand final tier contains the remaining citiesdifferentiated by whiskers of margins.

City Ranking City RankingMumbai 1 Kanpur 20Delhi 2 Ludhiana 21Bengaluru 3 Lucknow 22Chennai 4 Trivandrum 23Kolkata 5 Bhopal 24Hyderabad 6 Vadodara 25Ahmadabad 7 Kozhikode 26Pune 8 Guwahati 27Iaipur 9 Bhubaneswar 28Surat 10 Mysore 29Chandigarh 11 Nasik 30Gurgaon 12 Faridabad 31Nagpur 13 Jammu 32Coimbatore 14 Dehradun 33Kochi 15 Srinagar 34Goa 16 Visakhapatnam 35Indore 17 Patna 36Shimla 18 Jamshedpur 37NOIDA 19



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Levels of MeasurementThe Competitiveness Index is derived from four pillarindices: Factor Conditions Index that has 6 sub-indices;Context for Strategy and Rivalry Index that has 2sub-indices; Supporting and Related Industry Indexthat has 2 sub indices and Demand Conditions Indexcomprised in turn with 2 sub-indices.

CompetitivenessRanking

The report spews a plethora of insights at sub-categorylevels. For instance, a look at ranking in theInstitutional Support category, that falls underSupporting and Related Industry Index, offers someinteresting insights. Numerous cities in the top 10donot do well in this category: Mumbai ranks 34th,Kolkata 37th, and Surat, Chandigarh, and Gurgaonrank in the 30's as well. On the administrative side, notsurprisingly, Patna features close to the bottom of ourrankings; Ahmadabad actually come out on top in thiscategory. Kolkata ranked number 5 overall ranks adismal 37th in this category. Kolkata also features atthe bottom of the charts for Institutional Support. Thehigh competitiveness of Kolkata despite such lowadministrative and Institutional Support Systems issince its performance in other areas offsets. The topleague of cities Mumbai, Delhi, Bangalore, and Chennaigenerally perform well. In fact, in certain areas,Mumbai and Delhi standout as absoluteoutperformers-positive and far ahead-in relation tothe rest of the cities; Mumbai does so forCommunication and Supplier Sophistication whereasDelhi, driven by the sheer numerical presence ofcompanies, does so for Regional Competition Intensity.Thus, it is really satisfying to see data churning excitestracks for discussion and shaping an evolved andtextured understanding of where competitiveness ofour cities stands today, and suggests focus areas for thereform initiatives.

A Note on ClustersThe development of clusters across the country isanother highlight of the report. The competition for alarger piece of the economic pie has led toimprovements in physical and financial infrastructure,human capital, consumer paying capacity, and in some

cases better regulation and taxation as well. It isabsolutely not a coincidence that these are the preciseelements that increase the productivity of a regionaccording to The Porter's Diamond. The model alsoprofesses clusters as a catalyst for economic boom; thisis validated resoundingly by our results.Clusters can expand opportunities for the locals andcreate a synergistic environment for businesses toprosper. Consider this: the NCR tri-cities (i.e. NationalCapital Region cities: Delhi, Gurgaon and NOIDA),Mumbai, Chennai, Ahmadabad, and Surat all performwell in our model. A closer look reveals the presence ofclusters in each of these regions. The leather cluster inChennai, the diamond cluster in Surat, the petroleumcluster in Mumbai, the cotton yarn in Ahmadabad andthe colossal presence of MNCs in the NCR regionindicate the catalytic effect of clusters.

Dr. Amit Kapoor, Professor at ManagementDevelopment Institute and Chairman of Institutefor Competitiveness, India says that "The Indiangeography is waiting to be mapped and the Indiancities waiting to be branded. A clusterapproach-based on the economic concept ofspecialization-could do wonders in this situation.Once, a region becomes known for a reason, itsprosperity grows exponentially due to economies ofscale. A cluster based regime would open doors forcompetitive advantage and unlock umpteenavenues for states to head towards prosperity andopulence".

TheWay Forward:A Word for the Policy MakersThe first and foremost imperative for the policy makersis to take a holistic approach towards productivity,which is the key definer of competitiveness. Thedecision makers need to work on developing all roundcompetitiveness by improving on factors across theboard, creating the correct mix of conditions that canaptly support the target future industries or the onesalready present in the region. In addition to the genericholistic improvement, wewant to highlight certainspecifics that we think are going to be crucial factorsfor a city's productivity in the future.Environmental and transportation sustainability is akey area where most cities in India need to improveupon. As cities grow, the already congestion andpollution marred Indian cities will struggle to remainattractive for businesses. Sustainable publictransportation systems will be the key in the future.



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In fact, Susan Zielinski, Managing Director of SMART(Sustainable Mobility and Accessibility Research andTransformation) at University of Michigan, assertsthat the problem of traffic congestion in larger cities isnot small at all, and the subsequent consequencescannot be ignored.Building upon the clusters argument, we believe thecity developers need to give a serious thought to eitherbranding the city, developing a cluster around it orenhance the existing clusters. Since clusters play such avital role in the productivity of a region, carefulpolicies need to be implemented to more efficientlyorganize and deliver services, enhance networking,improve the support systems for clusters, i.e. humancapital, institutional and supplier efficiency. This alsofacilitates the branding of our cities. As MadhavRaman, Partner, Anagram Architects and AnupamYog,Managing Director, Mirabilis Advisory point out,a single exhaustive definition (still) eludes a city's"urban experience".The policy makers also need to think about continually'upgrading the diamond'. City governance needsfacelifts in most of our cities. We need to createefficient and less bureaucratic procedures to attract thebusinesses. Investment in communication andtransportation infrastructure should obviously be highon the priority list. Lastly, improving the conditions ofthe urban poor should be on the agenda as well. Mostoften, the latter condition is left to resolve itself. But itis one of the four pillars of the diamond model-thedemand conditions-and the productivity of a regioncannot be increased with three strong and a fourthweak pillar.We hope that the policy makers will be able to come upwith a priority list of things needing their attentionupon a careful perusal of our comprehensive analysis,and act accordingly.

On Governance: Gordon FellerCities with good governance have a greater potentialto create and support good living conditions. Thesecities have a better chance to offer their inhabitants amore equitable share in economic growth, access toinfrastructure and services, and participation inpolitical decision making. Accompanying theseopportunities, however, are growing demands on thecapacities of municipal institutions. As national-levelpublic funding dwindles for cities, public resourcesmust be stretched to meet the needs of the growingnumbers of urban dwellers. This is one of the centralchallenges of our times.

Formulating theRight Corporate StrategyWhether one is looking to start a business or to expandan existing one in India, the detailed analysis in thisreport indicates cogently where one ought to go. Thebeauty of the time-tested diamond model is itscomprehensive exhaustiveness. Each pillar carefullycovers all the different facets of productivity. No matterwhat a firm's evolution timeline is, the report providespointers for firms in the process of expansion or in anascent stage.The location decision can be made depending on theproductivity potential and the micro economicconditions a city has. The cities can be gauged for theirpotential for each industry and corporations can derivetheir strategies accordingly. Illustratively, goodinfrastructure and supporting conditions point to ahigh probability of success for a products /manufacturing oriented firm, whereas the quality ofinstitutional support, business incentives, andcompetition intensity in a region could be of interest toa fledgling business.The facts and analyses included can be applied to allfirms irrespective of their industry and future course ofaction. We hope that the report will be of use to boardlevel strategists and consultants to successfully extractand cross-map the information they need, and come upwith winning decisions for their firms.



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In Conclusionmore conducive the environment

About the AuthorsDr. Amit Kapoor

firms, industriesSandeep Mann

Other Contributors for the report, :

, , ,

Research Team from Institute for Competitiveness, IndiaI~,

Thanks to Christian Ketels for being the guiding force behind the idea of Institute for Competitiveness, India.

Copyright 2009 Institute for Competitiveness, India. All rights reserved.


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City Competitiveness Report Preview 2009