India’s urbanization and business attractiveness by 2020

Abstract

In the age of globalization, urban centers, including those in India, are competing with each other to attract business. Arguably, some cities are endowed with a high quality of infrastructure compared to others. In this context, the paper explores the role played by infrastructural development in ensuring attractiveness of cities in India from the standpoint of conducting business. It examines the various aspects of development of infrastructure within a city, including the importance of socioeconomic and environmental issues. The paper presents a strategic model to tackle the problems associated with urban development in India, concluding with a few policy implications.

Introduction

Urban infrastructure is a key ingredient in the success of Indian cities in the business world. Funding such a massive infrastructure requirement represents both a challenge and an opportunity (Goldman Sachs, 2007). Appropriate investment in infrastructure can increase industrial productivity which in turn is linked to economic growth of the country¹ (Ghosh and De, 1998, Joshi, 1990, Shah, 1992, Unni et al., 2001).

Studies related to development of urban centers and business attractiveness² is only beginning and therefore the data and theoretical underpinnings are rather weak. In 2008, the Greater Paris Investment Agency (2008) conducted a study comparing 15 major global cities³ on perceived attractiveness (based on investor intentions and city image) and real attractiveness (based on headquarter location of Forbes Global 2000 companies). Similarly, data on Indian cities is also substantially weak and the sparse available information is based on studies done either by agencies or outsourcing firms and consultants.⁴ For example, Kearney (2009) indices compared locations for attractiveness of investment flows but measured data at the zonal and state level.

Given this context, the central argument in this paper revolves around the issue of urban development in India and business attractiveness. As this topic is gaining significant importance in recent years and little work has been done in this area, the paper attempts to make a contribution to this subject. The paper has two specific objectives: (i) it attempts to identify the probable forces that can influence the development of Indian cities by 2020; and, (ii) it proposes a strategic model to tackle the problems associated with urban development in India. Since it is usually presumed that resolving urban problems (such as, insufficient infrastructure) can attract business, the model is expected not only to provide a new conceptual approach to decision-making (above and beyond the rational model of decision-making or management science), but also to be prescriptive in nature and provide a guide to action.

The organization of the paper is as follows. The next section presents an overview of the current scenario of urban centers in India. A simple force field analysis of the problem of changing Indian cities by 2020 is explained in the following section. Specifically, it attempts to identify the probable forces that can have an impact on the development of Indian cities by 2020. This section is followed by a discussion of how innovative thinking can be applied to the problem of urban development by constructing a strategic model. Other aspects of development related to social and political factors are described next. Finally, specific policy implications are discussed before presenting the concluding remarks.