dailyO
Politics

India must not rush to call Delhi, instead of Mumbai, its economic capital

Advertisement
S Murlidharan
S MurlidharanNov 28, 2016 | 17:42

India must not rush to call Delhi, instead of Mumbai, its economic capital

Oxford Economics ranks Delhi ahead of Mumbai on the basis of GDP for 2015 and on this count vests it with the status of both political and economic capital of India. And it predicts this trend to continue into 2030 with both the cities attaining higher word rankings - Delhi getting promoted to the 11th spot from the present 30th and Mumbai to the 14th spot from the present 31st in the pecking order of first 50 metropolitan entities in the globe.

Advertisement

A couple of things explain this transformation of the National Capital Region (NCR) of Delhi. Delhi might have got the dubious distinction of being the most polluted city, but it has over the years become a well-connected city. It boasts a metro network which Mumbai lacks and its traffic on roads moves faster vis-à-vis Mumbai's.

The USA has been following a conscious policy of separating its economic and political state and national capitals. To wit, the relatively unknown Sacramento is the political capital of California whereas San Francisco the buzzing commercial city is undoubtedly is its economic capital. The strategy has paid off with pressure on infrastructure getting divided evenly between the two cities.

Had the two capitals been the same, the pressure on infrastructure would have been unbearable.

07mumbai1_112816053330.jpg
The prohibitive real estate prices and rents in Mumbai also repels corporate India and makes them gravitate towards NCR Delhi. Photo credit: MMRDA 

We might have wittingly or unwittingly emulated the US when it comes to the national capital but events seem to have upset the duality. Relatively better transportation and the tendency to crowd round the political power center perhaps explain Mumbai ceding place to Delhi.

To put it more bluntly, Delhi beckons wheeler-dealers as well as lobbyists and liaison officers. In that sense we have perhaps failed to nourish and cherish the importance of separating economic and political capitals of India.

Advertisement

Mumbai was sought to be made one of the international financial centers but the attempt has barely taken off thanks to Dubai and Singapore in the geographical neighbourhood easily elbowing it out of contention. Small wonder financial services companies are more enamoured of Gurgaon than Mumbai or Pune.

The prohibitive real estate prices and rents in Mumbai also repels corporate India and makes them gravitate towards NCR Delhi.

But the prognosis that the trend will continue into 2030 and beyond may prove to be hasty in hindsight because Mumbai Metropolitan Region (MMR) can easily bounce back thanks to certain natural advantages it enjoys over NCR Delhi.

Delhi is landlocked whereas Mumbai boasts a long coastline. Mumbai's surrounds are therefore likely to beckon more the manufacturing and export-oriented industries than Delhi.

If only the Maharashtra government girds its loins. In fact other coastal state like Tamil Nadu and Gujarat too can upset Delhi's applecart in the medium and long term, especially if services led growth story is made to take a pause and manufacturing takes the pride of place as it should.

The advent of Goods and Services Tax GST hopefully from the fiscal year 2017-18 could also change the GDP calculus for the better. Being a dragnet, it can be counted upon to compel the existing unorganised sector to fall in line and join the national mainstream. Should this happen there could be realignment of business centers. Delhi may have to fight hard to maintain its lead and momentum.

Advertisement

The refreshing prospect of less-cash economy also portends happenings in the hinterland and rural areas being more fully captured in the national GDP calculus. In short, Oxford Economics may be right about 2015 but might have jumped the gun about 2030 and beyond. Oxford Economics may be right about 2015 but might have jumped the gun about 2030 and beyond.

Last updated: November 30, 2016 | 11:27
IN THIS STORY
Please log in
I agree with DailyO's privacy policy