Indian Cities: A Tale of More Than Two Cities?

By Dr. Anand Kulkarni

Cities are core drivers of wealth and prosperity. Their fundamental strengths reside in two main ways: the productivity enhancing benefits of agglomeration of activities, access to large skills base, knowledge sharing and transfers; and the ability to provide services over a wide consumer base thereby lowering costs (McKinsey Global Institute, 2010). In addition, cities are complex economic and social environmental systems, which are both the problem and solution to many global challenges such as climate change, population growth and inequality.

The Modi Government has instituted the ‘Smart City’ concept in which, after an exhaustive and competitive process, winning cities are selected to develop strategies to address critical problems including in areas of environmental management, transport, infrastructure and urban landscape. (Government of India (a))

However, how well are Indian cities placed in growing and meeting the needs of its citizens? To examine this, at least in part, we used the United Nations population agglomeration data by city or district-populations with greater than 300,000- for Chinese and Indian cities, and used the categorisation of very small cities (300,000 to 500,000), small cities (500,000-1million), medium sized cities (1-5 million), large cities (5-10 million) and Megacities (greater than 10 million). Data for 2015 and projections to 2030 were utilised from UN data. The categorisations by city size are based on, but not completely analogous to, the UN classifications (United Nations 2015).

What we observe is that in 2030 (and 2015) China is expected to have 398 cities above populations of 300,000 (in any of the size categories mentioned above), compared to India’s 166. This is itself telling: for roughly similar national population sizes India is far less urbanised than China. If we accept the basic proposition that cities are drivers of economic growth and higher living standards then arguably Indian is on the back foot to start with.

According to UN projections (UN 2015), India’s very small city (ie 300,000 to 500,000) share of total number of cities will decline from 34.9% in 2015 to 12.7% in 2030, similar to the Chinese decline (34.7% to 14.1%), while India’s small city share of total cities will rise from 30.1% to 45.8%, at a rate faster than China’s, which will grow from 39.2% to 48.7%. In both countries the share of total cities in the middle sized group (1-5 million) will grow, in India’s case from 29.5% to 36.1 %, and China from 22.1% to 31.5%. The sharp difference will be in the large city category (5-10 million). In 2015, India had 5 large cities expected to decline to 2 by 2030, while China had 10 large cities in 2015 expected to grow to 16 by 2030. In the mega city camp, India’s megacities will grow from 4 in 2015 to 7 in 2030 (Chennai, Hyderabad and Ahmedabad will join Bangalore, Mumbai, Delhi and Kolkata as the existing 4 megacities), representing 2.4% and 4.2% shares of total number of cities respectively, while for China, megacities will account for 1.8% of the number of cities in 2030, compared to 1.5% in 2015. Both countries are expected to have 7 mega cities in 2030.

Thus what we are observing is that 3 of India’s large cities will grow into mega cities by 2030, but medium sized cities are not growing into large cities, unlike in China where the number of large cities over the 15 year period will grow. According to McKinsey analysis, most of the growth in the world’s GDP in the upcoming decades will come from cities of the size of 150,000 to 10 million, which therefore must include a very significant role for the 5-10 million large city cohort, of which India does not have many (McKinsey Global Institute 2011). Therefore, unless Indian medium sized cities can power economic prosperity for the nation as a whole in the future, then India’s growth outlook could be constrained. Do Indian medium sized cities really have this potential? While medium sized cities such as Nagpur, Jaipur, Coimbatore, Kanpur and the like have been growing, do they possess the infrastructure, skills, innovations, technology and industrial capabilities to drive sustained national effort? As just one indicator of the challenges that lie ahead, the number of patent applications in these Indian cities is at the lower end when compared to the world’s most competitive cities (Ni, Kresl and Liu W 2015).

Drawing on a range of data, we project the contribution of the top 20 cities (by population size) to country GDP in 2030 for India and China and compare this to the contribution of the same cities to national GDP in 2013[1]. Similarly, we compare the contribution to country population of the top 20 cities in 2030 and 2013 (for the same cities), for both China and India.

Source: United Nations Population Data (2014), Government of India (b), and Ni P, Kresl P and Liu W. Table based on Author estimates.

What is instructive here is that while the top 20 cities are expected to make a very sizeable contribution to country GDP in China in 2030 (almost 25%), this is not the case for India, in which the top 20 cities will only make a contribution of just over 10% to national GDP. A stark difference is that the top 20 cities in China in 2030 will comprise 7 megacities and 13 large cities, while for India, the top 20 cities will comprise 7 mega cities as well but only 2 large cities and 11 medium sized cities, reinforcing our earlier points. In addition, what is alarming is the expected declining contribution of the top 20 cities to national GDP between 2013 and 2030 from 15.5% to 11.6%, compare to growth in contribution in the case of China (19.1% to 24.4%).

Further, it is also revealing that by 2030, the contribution of the top 20 Indian cities to national population will exceed the contribution of the top 20 cities to national GDP, suggesting some real concerns about long term productivity. The opposite is anticipated in China.

Looking ahead, city planners in India in our view, should consider a large city development agenda, with a strong focus on growth enhancing investments, new industries and technologies and strong supporting infrastructure. This agenda could have a number of dimensions: enhancing the performance of existing large cities; and facilitating growth of medium sized cities into large cities to further realise scale economies and benefits of agglomeration without leading to the attendant problems of congestion and environmental degradation, among other things.

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Bibliography

Government of India (a) Smart Cities www.smartcities.gov.in accessed April 4 2016

Government of India (b) District wise GDP and Growth rate at constant price 2004-2005 www.data.gov.in/keywords/gdp accessed March 30 2016

McKinsey Global Institute 2010 India’s Urban Awakening: Building Inclusive Cities

McKinsey Global Institute 2011 Urban World: Mapping the Economic Power of Cities

Ni P, Kresl P and Liu W 2015 The Global Urban Competitiveness Report 2013 Edward Elgar

United Nations (UN) 2015 World Urbanisation Prospects 2014 Revision.

[1] 2013 data is used for GDP as the Global Urban Competitiveness report has GDP per capita figures for that year (or earliest) upon which projections for GDP to 2030 are based.