[op-ed snap] Making Indian cities more competitive

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Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Effects of urbanisation on Indian Economy, drivers of city competitiveness and how they can benefit Indian Economy


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Why is urbanization important for India?

  1. The growth potential through urbanization is huge, given that India is one of the most densely populated countries in the world
  2. But India is still at an early stage in this transformation, given that it is a lot less urbanized for its stage of development
  3. The 100 smart cities programme is an effort to address this gap

Understanding of what makes cities more competitive

  1. The understanding is still evolving
  2. With more than 600 districts in India, a deeper understanding of the drivers of competitiveness, and providing benchmarks to measure, monitor and improve performance will help local leaders to pursue city competitiveness agenda better

Several drivers of city competitiveness
Demographic traits:

  1. It includes age profile and population density of a city, provide insights into the size of local market, and the potential supply of local entrepreneurs
  2. Most entrepreneurs always start their businesses in their current local area

Structural traits: Physical and Human Infrastructure

  1. Two key structural traits of city competitiveness are its physical and human infrastructure
  2. Basic services like roads, electricity, and water supply are essential for all businesses
  3. But new and small enterprises are particularly dependent upon local infrastructure
  4. Human capital is becoming increasingly more important for city competitiveness
  5. Besides physical and human infrastructure, the overall connectivity of a city to major cities is also an important structural trait of competitiveness

Agglomeration economies: 

  1. A good city infrastructure enables entrepreneurs to benefit from agglomeration economies
  2. Agglomeration economies are the benefits that come when firms and people locate near one another together in cities and industrial clusters

Other drivers of city competitiveness

  1. Two key drivers of city competitiveness in India are education and physical infrastructure
  2. These two structural traits are true for both manufacturing and services
  3. The high population density of a city makes large-scale manufacturing enterprises less competitive, and forces them to move to rural settings to become more competitive
  4. Manufacturers avoid the high costs of urban areas, but they also avoid the most remote areas of India in favour of settings that are relatively near large population centres
  5. likely to access customers directly or to connect to shipping routes

Effects of population and education on different industries

  1. The size of local population of a district plays an important role for informal manufacturing
  2. This contrasts with large firms, where education matters more
  3. Organized manufacturing establishments have access to broader resources that reduce dependency on local infrastructure and household finance
  4. For the service industry, overall district population is as important as it is for the unorganized manufacturing industry

The way forward

  1. India’s urban transformation will take place at a 100 times faster pace than what developed countries have experienced
  2. India is at the forefront of this global transformation
  3. Cities raise special challenges in forming public-private partnerships in building physical and human infrastructure
  4. They also provide a quick opportunity to accelerate growth, create jobs, and promote shared prosperity
Urban Transformation – Smart Cities, AMRUT, etc.
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