Making Sense of Bangalore

7/29/2019 Making Sense of Bangalore

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July 2010

Making Sense of BangaloreEdward L. Glaeser


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* This rsarch was undd by th Latum Institut and I am ratul t Ryan Strtr at th Institut r his suppr t.

Kristina Tbi prvidd xcllnt rsarch assistanc. Lakshmi Iyr prvidd vry hlpul cmmnts.

Mking Sense

of Bngloe

Edwd L. Glese *Havard Univrsity


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Cpyriht 2010 Latum Limitd

All rihts rsrvd. N part this publicatin may b rprducd r transmittd in any rm r by any mans,

lctrnic r mchanical includin phtcpyin, rcrdin r any inrmatin stra r rtrival systm,

withut th prir writtn prmissin th cpyriht hldr. Plas dirct all nquiris t th publishrs.

Legum Insiue

11 Charls Strt, Mayair

Lndn, W1J 5DW

Unitd Kindm

T +44 (0)20 7148 5400

F +44 (0)20 7148 5401

www.li.om

[email protected]


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CoNTeNTS

Abstract 4

Chaptr 1 Intrductin 5

Chaptr 2 Th Succsss and Failurs Banalr 7

Chaptr 3 Undrstandin Banalrs Succss 13

Chaptr 4 Th Rts Banalrs Succss:

educatin, Inrastructur and Amnitis 17

Chaptr 5 Plicy Lssns and Challns 21

Cnclusin 28

Rrncs 29


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5

ABSTRACT

Banalr is amn th mst succssul citis in India and th dvlpin wrld. Its ppulatin

rwth has bn dramatic and it has nratd vast amunts walth and prsprity.

Banalrs cnmic succss rcts th ability citis t cnnct smart ppl wh thn

wrk tthr and larn rm n anthr. In th dvlpin wrld, placs lik Banalr

als srv as cnduits r knwld and capital and sr vics acrss cntinnts. Th vitality

Banalr cntrasts vividly with th cntinuin pvrty rural India. That cntrast

rminds us that citis ar a crucial part cnmic dvlpmnt. It maks ar mr sns

t dirctly addrss th challns urban rwth, such as unclan watr and cnstin,

rathr than t artifcially cnstrain th xpansin ma-citis lik Banalr.


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7

chaptEr 1

INTRoDUCTIoN

Banalr, tday, appars t b th littrin xampl Indian succss in inrmatin

tchnly. Banalrs succss, symblizd by frms such as Wipr and Insys, has rshapd

wstrn imas India, rm a natin knwn r rural pvrty t a plac rnwnd r wll-

traind ninrs wh dlivr hih quality stwar at lw csts. This shit in ima rcts

a rbust rality, as Indian stwar xprts nw xcd 40 billin dllars, apprximatly

twnty-thr prcnt th sub-cntinnts ttal xprts1. That industry is vrwhlminly

lcatd in a small numbr lar citis, and Banalrs rin Karnataka is rspnsibl

r a third Indias ttal stwar xprts.2

Th ris Banalr as a stwar cntr has crtainly

cratd lar fnancial bnfts r many Indians. Th city is nw

hm t 10,000 millinairs and pr capita incm in th urban

almratin is twic that th Indian avra.3 Yt th city

crtainly als acs majr challns. Parts Banalr d indd l lik a prsprus

Silicn Vally fc park, but th city is still in India, and pr ppl will invitably ck t an

cnmic nin. on stimat susts that almst twnty prcnt ppl in Banalr

liv blw th pvrty lin.4

Banalrs pvrty may b th invitabl rsult bin a prductiv city in a cuntry

with hundrds millins ppl and r miratin, but th impact all that miratin

is that public rsurcs bcm nrmusly vrtaxd. Watr is rarly clan and swarmains a challn. Stwar cmpanis cannt rly n th lctricity rid and must

dpnd n mrncy nratrs. Trafc cnstin is an nrmus prblm, with crss-

twn cmmuts tn lastin abv an hur. Th talnt in Banalr is crtainly frst wrld,

but th public inrastructur is nt.

Atr rviwin th availabl acts abut Banalr in Chaptr 2 this papr, I turn t

an analysis th surcs Banalrs succss. Whil n n hand, Banalr is a symbl

1 http://www.nasscm.r/Nasscm/tmplats/NrmalPa.aspx?id=54612; http://www.cnmist.cm/cuntris/INDIA/pr-

il.cm?ldr=Prfl-FactSht

2 http://www.rutrs.cm/articl/inDpthNws/idUSISL294850200805203 http://timsfndia.indiatims.cm/articlshw/1842018.cms

4 http://www.cs.iisc.rnt.in/nry/watr/papr/banalr/TVR24_p11_Banalr.pd

Th talnt in Banalr is

crtainly frst wrld, but thpublic inrastructur is nt


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Legum Insiue

8

th wrlds atnss, th as cmmunicatin acrss cntinnts, th city shuld als

b a symbl th cntinuin imprtanc urban prximity. Th stwar industry is

s cncntratd in Banalr bcaus idas d nt mv rtlssly acrss spac. Yun

stwar ntrprnurs cm t Banalr t larn th stwar skills that ar critical t

succss. Cncntratin all that talnt in a sinl city maks it asir t crdinat ac-t-ac mtins with rin invstrs and clints. Banalrs minnc susts that India

is ar mr likly t succd whn its citizns ar cnnctd with ach thr and with th

dvlpin wrld in dns urban aras.

In Chaptr 4, I turn t th rts Banalrs succss. Whil it may hav bn invitabl

that Indias rwth wuld b cncntratd in dns citis, it was crtainly nt invitabl that

Banalr wuld mr as such a pr-minnt plac. Thr ar many actrs that cam

tthr t mak Banalr such an inrmatin tchnly hub,

includin a ln-standin cmmitmnt t nw industris and a

rlativly plasant climat, but ninrin ducatin playd th

primary rl. Th citys succss has cm rm its human capital.

Atr all, th urban advanta at sharin idas is ar mr valuabl

whn ppl hav mr idas t shar.

Bth Banalrs succsss and ailurs sust implicatins r

plicy bth at th natinal and lcal lvl, in India and lswhr.

Th nrmus succsss Banalr and thr rat Indian

mtrpliss rmind us that th prsnt and utur bln t

citis. Thr is n utur in rural pvrty; dvlpin cuntris that

bt n thir villas ar missin th act that th rad t walth

cms rm cnnctin with th dvlpd wrld and citis ar

th placs that mak ths cnnctins. Mrvr, th advantas citis ar tid clsly

t th amunt skills assmbld in ths urban aras. Invstin in ducatin may b th

mst imprtant mans nablin city-ld cnmic rwth.

Yt Banalrs rwth als xpss th waknsss its public inrastructur,

particularly in th aras watr, swa and transprtatin. Banalr acs a battl t

rtain talnt, just lik any thr city, and quality li actrs mattr in that fht. Th citys

ln cmmuts sust th valu cnstin pricin, n at last sm its rads. Th

limitatins n clan watr cry ut r mr invstmnt in halth-rlatd inrastructur.

Banalr is a mdl cnnctd ntrprnurship, but s ar, its public sctr has aildt dlivr cr urban srvics that match its privat talnt.

Thr is n utur in rural

pvrty; dvlpin cuntristhat bt n thir villas

ar missin th act that

th rad t walth cms

rm cnnctin with th

dvlpd wrld and citis

ar th placs that mak

ths cnnctins


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9

chaptEr 2

THe SUCCeSSeS AND FAILUReS

oF BANgALoRe

Banalr is, in many rspcts, th nwst Indias fv larst citis. Dlhi is an ancint

Indian capital. Klkata, Mumbai and Chnnai, nc Calcutta, Bmbay and Madras rspctivly,

wr imprtant prts in th 18th cntury and had all rwn lar by th start th

20th cntury. In 1901, whn Mumbai and Klkata bth had cls t a millin rsidnts

and Chnnai had 500,000 ppl, thr wr nly 160,000 ppl in th larr urban

almratin Banalr.5 Th city ds hav pr-mdrn histry. It was alldly laid

ut in th 16th cntury, and was an bjct cnict btwn th British and Haidar Ali in

th 1700s, but th citys ris t impr tanc is a 20th cntury phnmnn. Fiur 1 shws

Banalrs ppulatin rm 1901 t tday.

Figue 1: poulion of Bngloe (19012009)

0

2

4

5

6

7

3

1

1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 2009

Year

Population(Millions)

Surc: Cnsus India

5 http://www.cha.lib.latrb.du.au/dcd/pa.php?titl=&actin=nxt&rcrd=1180


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Legum Insiue

10

Th citys rlativly rcnt riin has csts: Banalr crtainly has a mr limitd

architctural hrita than Mumbai r Dlhi. But thr ar als bnfts. Th ldr prt

citis sur rm bin hmmd in by watr, which rducs th ability t build and t travl.

Th prt citis can als sur rm xcssiv hat and humidity, whil Banalrs lcatin

hih n th Dccan platau ivs it a rlativly mild climat. In a wrld in which ppulatinis mbil, a rlativly bnin climat is an asst that hlps t attract human capital (glasr,

Klk and Saiz, 2001).

As Fiur 1 illustrats, Banalrs rwth bcam particularly

dramatic atr 1941. In that yar, Banalrs ppulatin

420,000 wuld hav mad it Amricas 19th larst city, cmin

in atr Nwark and ahad Kansas City. Tday, Banalr is,

curs, larr than any Amrican city thr than Nw Yrk.

Dspit Banalrs mdrn assciatin with stwar and inrmatin tchnly, it is

wrth rmmbrin that th ppulatin th city rw apprximatly ur-ld btwn

1941 and 1971, t vr 1.6 millin, br thr was any sinifcant inrmatin tchnly

in th plac. 6

Durin ths yars, Banalr bcam th capital th stat Karnataka and an

incrasin hub r havy industry, much which was subsidizd and prtctd by th

vrnmnt. Fr xampl, Hindustan Aircrat Limitd, nw Hindustan Arnautics, Natinal

Arspac Labratris and Bharat elctrnics lcatd in th city durin th pst-war

prid.7 But whil ths rlativly hih-tch industris sm imprtant tday bcaus

thy appar t b pintin th way twards mdrn Banalr, durin mst th pst-

war prid, txtils wr Banalrs larst industry. Banalr was a cntr cttn

prductin, includin bth dmstic prducrs and rin invstrs, such as th vast Binny

Mills. Th Banalr rin als had an ldr chmical industry which cntinud t b

imprtant in th 1950s.

Th dminanc txtils durin th arly pst-war yars is, in a sns, unsurprisin.

Prducin clth and clthin has bn a primary businss urban aras r a millnnium,

bcaus clthin is a basic human ncssity and thr ar rturns t scal assciatd with

prducin in a sinl lcatin. Cttn has bn rwn in India r at last 5,000 yars, and

India rmains th wrlds scnd larst prducr raw cttn tday.8 Cttn prductin,

curs, was vn mr imprtant in Mumbai and Chnnai than it was in Banalr Th

nly rasn why cttn prductin in pst-war Banalr is rmtly surprisin is thatKarnataka, unlik Mumbais stat Maharashtra, is nt itsl a bi cttn-prducin rin,

and th city had nt histrically had a lar rl in that industry. 9

Banalrs ris as a txtil industry had mr t d with watr pwr than with cttn

sds. In 1906, Banalr bcam th frst sinifcant Indian city with lctric lihts, thanks

t th hydr-lctric pwr cratd by th dam at Shivanasamudra. Th Princly Stat

Mysr was wll ndwd with rivrs, and th Maharajas and thir Diwans invstd havily

6 http://www.macitis.uni-kln.d/_ram.htm?http://www.macitis.uni-kln.d/dcumntatin/banalr/statistics.htm

7 http://www.hal-india.cm/abutus.asp; http://www.nal.rs.in/pas/histry.htm; http://www.bl-india.cm/indx.aspx?q=&sctinid=1

8 http://www.as.usda.v/ainfls/200809/146295919.pd

9 Karnataka, r xampl, prducd lss than 200,000 bals cttn in 2007 (http://ds.kar.nic.in/mainpa.asp?ptin=2),which is lss than n prcnt Indias ttal utput, by cntrast Maharashtra prducs mr than n-fth Indias ttal

utput. Th nihbrin stat Andhra Pradsh, hwvr, ds prduc vr y sinifcant amunts raw cttn.

Tday, Banalr is, curs,

larr than any Amrican city

thr than Nw Yrk


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11

Mking Sense of Bngloe

in pwr prductin. A rlativ abundanc hydr-lctric pwr wuld mak Banalr

attractiv bth t txtil mills and t havy industry durin th pst-war prid.

Banalrs pr-1970 rwth is dply tid tthr with public intrvntins thr

majr rms: inrastructur, ducatin and industrial plicy. Th dvlpmnt physical

inrastructur, such as hydr-lctric pwr, was n majr rm public supprt rindustry in Banalr. Th vrnmnt Mysr playd a dirct rl in cntractin

with gnral elctric t dvlp hydrpwr, riinally t hlp ld xtractin rm th

Klar min. Whil many Indias princly stats had ladrs wh wr knwn mr r

xtravaant spndin than d sns, th Maharajas Mysr had a rputatin r

runnin th bst administratin in nativ India. With th aid cmptnt Dwans, such

as Mizra Ismail and th rmarkabl Mkshaundam Visvsvaraya (Sir MV), Mysr invstd

rlativly havily in th dams and rads that wuld mak Banalr mr appalin r

industry. Banalr crtainly has sinifcant prblms in bth transprtatin and lctricity

nratin, but it was and rmains mr dvlpd in ths aras than much India.

I will cus n th crucial rl that ducatin plicy cntinus t play in Banalrs

succss in Chaptr 4 this papr, but it is imprtant t nt that th rins cmmitmnt

t human capital dats t th pr-Indpndnc ra. Mysr was th frst princly stat t

stablish cmpulsry ducatin. Th Maharajah dnatd th land in Banalr r th Indian

Institut Scinc. Mysrs Prim Ministr, Sir MV, was himsl

an accmplishd ninr and thuht that ducatin was critical

r India t dvlp. H playd a sinifcant rl in undin th

Univrsity Mysr, and th Maharaja was its frst chancllr.

Finally, and prbably lss succssully, th vrnmnt nad

in a vry activ industrial plicy startin undr th Maharajahs.

Indd, it is hard t clarly distinuish btwn th Maharajah

Mysr as had stat and th Maharajah Mysr as vntur

capitalist and ntrprnur. Fr xampl, th Maharajah was an

arly supprtr Hindustan Arnautics. Crtainly, his cnsidrabl walth was built up,

in part, by invstin in nascnt industris. Atr indpndnc, Nhrus industrializatin

plicis and prtctinism strnly supprtd Banalrs havy industry. Atr all, Nhru

was crtainly inuncd by Sir MV and calld Banalr th city th utur. Th rins

supply pwr and ninrs put it int an idal psitin t tak advanta public

supprt r dmstic tchnly frms.Br Banalr bcam a stwar hub, it was alrady a cntr r Indian lctrnics

and many ths lctrnics wr public undr takins, spnsrd by Nhru. Fr xampl,

Indian Tlphn Industris, which maks phn quipmnt and has mr than 12,000

mplys, was undd in Banalr in 1948.10 Bharat elctrnics Limitd was anthr

public ntrpris undd in th city in 1954. Th Indian army is a majr clint this 15,000

plus prsn frm.11 Th Indian vrnmnt xrcisd an nrmus amunt cntrl vr

cnmic dvlpmnt in frst dcads atr indpndnc, s it shuldnt b surprisin

10 http://www.hindustantims.cm/budt/StryPa.aspx?id=13ac2912-19b7-42d2-b9c-5814583b056&Hadlin=Ailin+tlphn+frm+hps+t+rin+in+bttr+tims&Catry=Chunk-HT-UI-IndiaBudt09-Sctrs

11 http://rsurcs.bnt.cm/tpic/bharat+lctrnics.html

In 1906, Banalr bcam

th frst sinifcant Indian city

with lctric lihts, thanks

t th hydr-lctric pwrcratd by th dam at

Shivanasamudra


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Legum Insiue

12

that th rwth Banalr durin that tim prid was uidd by vrnmnt actin.

Mrvr, it is hard t jud i ths public ntrpriss ar succsss r ailurs sinc th

vrnmnt has bn such a majr clint.

Banalrs stwar industry, cnvrsly, cmpts in a r markt, althuh

unqustinably th public sctr has inuncd th industr ys dvlpmnt. Whil th r is Banalr at th wrlds utsurcin capital is tn assciatd with Txas Instrumnts

dcisin t lcat a plant thr in 1985, th tw larst Indian frms in th industr y, Insys

and Wipr, had pratins in Banalr br that dat. Wiprs transitin rm dibl ils

int cmputr prductin cam abut whn th Indian vrnmnt pushd IBM ut th

cuntry. A Banalr lcatin was natural bcaus th abundanc scintifc talnt in

th city. Wipr thn mvd int stwar, supprtd by massiv taris n Wstrn imprts.

Durin this arly phas, it wasnt particularly bvius that Wipr culd cmpt n

a lbal sta makin ithr prsnal cmputrs r stwar withut th supprt

prtctinist plicis. Hwvr, as India pnd up, th frm bcam a stwar cnsultant

sllin th srvics its talntd ninrs t th wst. Th cnsultin arranmnt nabld

Wipr t cllabrat acrss cntinnts, cmbinin its skilld wrkrs with th knwld

pssssd lswhr. This mdl was crtainly bttr than tryin t bat Silicn Vally

sinl-handdly, and it illustrats th cr Banalrs mdrn succss as a atway whr

knwld mvs rm ast t wst and back aain.

A rcnt survy Indias cmputr cmpanis illustrats that Wiprs transitin is

th industry nrm. As ppsd t Chins frms which mak hardwar and sll packad

stwar, Indian frms typically sll stwar srvics (grry, Nlln and Tnv, 2008).

Chins stwar prductin catrs strnly t a rwin dmstic markt; Indian stwar

srvics ar xprtd. Indian prft marins ar als much hihr, at last as a shar sals.

Thir wrkrs als typically arn mr.

Th rl Banalr as a atway was urthr nhancd whn wstrn cmpanis,

lik Txas Instrumnts, ban sttin up stablishmnts in th city. In 1985, Txas Instrumnts

pnd th frst multi-natinal stwar dsin cntr in th city. Frin invstmnt in

Banalr wasnt nw, as th citys cmbinatin skilld wrkrs and rlativly d

inrastructur had ln ivn it appal. Yt Txas Instrumnts mv had nrmus symblic

imprtanc. I an Amrican cmpany as succssul and wll-stablishd at TI culd writ its

stwar usin lwr cst Indian labr, thn why culdnt vryn?

And s, vr th past 25 yars, Banalr has manad t sll Indian intllinc nth wrld markt. Smtims this has cm thruh multi-natinal subsidiaris, lik TI r

Yah. Yt mr tn, th citys succss has bn dvlpd by Indian ntrprnurs

wh cmbin ninrin talnt and knwld utsid dmand r that talnt. Th

rsult is a plac that has bcm a capital th inrmatin a and a trainin rund r

yun talnt.

As Banalrs inrmatin tchnly sctr has rwn, th city has xpandd

dramatically and bcm much richr. Fiur 2 shws th rwth Banalr rlativ t

India as a whl and rlativ t thr majr citis. Sinc 1970, nly Dlhi has xpandd

mr rapidly, buyd by th nrmus advanta bin th sat Indias vrnmnt.

Banalr has xpandd much mr rapidly than Mumbai r Chnnai r Calcutta r


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13


rstwhil cmptitrs in th inrmatin tchnly markt (nt shwn) lik Pun. That

rwth was havily buyd by stwar xprts, which rachd mr than 13 billin dllars

in th stat Karnataka in th 2007-2008 tim prid. 12

Figue 2: poulion Gow of Mjo ciies (1971 2009)

1.0

2.0

3.0

3.5

4.0

2.5

1.5

1971 1981 1991 2001 2009

Year

GrowthIndex(1971=1)

Delhi

Bangalore

MumbaiCalcutta

India

Chennai

Surc: Cnsus India

As Tabl 1 shws, Banalr has als bcm incrasinly walthy. Ral incms rw

by 73% btwn 1998 and 2005. This rwth was much astr than th rwth India as

a whl. In 1998, Banalr incms wr 24 prcnt hihr than th Indian avra. Tday,

Banalr incms ar narly svnty prcnt hihr than th Indian avra. Th ap has

bn widnin btwn incms in Banalr and ths in th stat Karnataka, which

surrunds it, as wll as th ap btwn arnins in th city and th rst th sub-cntinnt.

tble 1: pe ci Inome in Indi, Knk, nd Bngloe

(rel 2005 rs) (rel 2005 $s)

Ye all Indi Knk Bngloe all Indi Knk Bngloe

1998 99 19,052 13,902 23,714 432 315 538

1999 00 19,752 17,219 32,539 448 390 738

2000 01 20,121 18,121 34,402 456 411 780

2003 04 22,682 18,931 34,369 514 429 779

2004 05 24,236 20,715 41,105 550 470 932

Nts: Karnataka and Banalr incm (in Rs) rm Karnataka at a glanc, Dirctrat ecnmics &

Statistics, Karnataka gvrnmnt. India incm (in Rs) rm Dirctrat ecnmics and Statistics, Plannin and

Dvlpmnt. Incm cnvrtd int ral 2005 rups usin th CPI r all ds, rm Ministry Labur and

emplymnt, gvt. India. Incm cnvrtd t dllar s usin xchan rat data rm th Rsr v Bank India.

All data und n Indiastat.cm.

12 http://www.rutrs.cm/articl/inDpthNws/idUSISL29485020080520


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Legum Insiue

14

Banalr huss a lar numbr xtrmly walthy Indians, and it is crtainly a

prsprus plac rlativ t th rst th sub-cntinnt. Yt thr ar als plnty

prr ppl in city. on stimat is that abut 25 prcnt Banalrs ppulatin livs

in th citys fcial slums, and abut 20 prcnt th ppl livin in Banalr wuld

b dfnd as pr.13

Ths numbrs ar lw rlativ t thr Indian citis such as Mumbai,but sinc th urban Indian pvrty lin r urban dwllrs is abut 11 dllars a mnth,

thy still imply a lvl dprivatin that is vry hih.14 Likwis, vn thuh Banalr

has a rmarkabl cncntratin hihly ducatd ppl, mr

than 15 prcnt th citys ppulatin is illitrat.15 Whil that

fur is lw by th standards India and Karnataka, th act that

Banalr is hm t almst a millin ppl wh cannt rad r

writ susts that th city isnt just hm t stwar ninrs.

That act isnt surprisin and it crtainly isnt any srt

indictmnt Banalr. India is still a rlativly pr cuntry and

thr is r miratin acrss citis and twns. Any succssul

plac is in t attract thusands mirants and many thm ar in t b pr. As

such, th act that thr ar hundrds thusands pr ppl in Banalr is bst sn

as a rctin th citys succss and ability t prvid pprtunity r pr mirants.

13 http://www.archidv.r/IMg/pd/gvrnanc_cnmic_sttins_and_pvrty_in_Banalr.pd; http://www.cs.iisc.rnt.in

/nry/watr/papr/banalr/TVR24_p11_Banalr.pd14 http://plannincmmissin.nic.in/rprts/articls/ncsxna/ar_pvrty.htm

15 (Indicus 2006)

evn thuh Banalr has a

rmarkabl cncntratin

hihly ducatd ppl, mr

than 15 prcnt th citys

ppulatin is illitrat


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15

chaptEr 3

UNDeRSTANDINg

BANgALoReS SUCCeSS

Banalrs succss ultimatly cms rm its rl as a cnduit btwn India and th

wrlds walthir natins. Lik Silicn Vally, it spcializs in cnnctin smart, yun

stwar ntrprnurs wh hp rm frm t frm. Th skills that thy acquir in Banalr

ar, i anythin, vn mr imprtant than ths that thir U.S. quivalnts larn in Santa

Clara Cunty, bcaus ths skills invlv accssin markts n th thr sid th wrld.

Banalr is ultimatly a plac whr human capital is cratd that nabls innat talnt t

fnd its nich in th lbal markt.

Cybr-srs hav ln sustd that inrmatin tchnly smd likly t mak

citis bslt. Thr is littl vidnc t supprt this viw (glasr and gaspar, 1998), and

much vidnc t supprt th altrnativ viw that tchnlical chans hav mad citis

incrasinly imprtant. on th mst tllin acts is that th cntr nw tchnlis,

Silicn Vally, is als th ladin mdrn xampl raphic cncntratin industr y. I

inrmatin tchnly mad th nd t mt ac-t-ac bslt, thn why wuld s

many inrmatin tchnly frms clustr tthr in a dns, xpnsiv ara?

Th altrnativ viw is that tchnlical chan has incrasd th rturns t skill.

This act has bn shwn in scrs paprs, which hav illustratd th ris in rturns t

rmal schlin (.. Katz and Murphy, 1992) and incrasin rturns t unmasurd skills(.. Juhn, Murphy and Pirc, 1993). Nw tchnlis ar difcult and rquir trainin, but

thy als crat mr pprtunitis r ppl with skills. glbalizatin has a similar ct.

Whil cmptitin with Japans car manuacturrs has causd a rat dal difculty r

th aut-makrs Dtrit, lbal markts ar a bn t th mst skilld wrkrs in Wall

Strt and Silicn Vally.

Citis, lik Banalr, ar in many ways lik schls. Just as univrsitis almrat talnt

and nabl studnts t larn rm ach thr and ccasinally als rm prssrs, citis

als cnnct smart ppl wh larn rm n anthr. As th rat enlish cnmist

Alrd Marshall wrt mr than 120 yars a, in dns almratins th mystris


17/33

Legum Insiue

16

th trad bcm n mystry but ar, as it wr, in th air.16 Sm this larnin ccurs

within frms, but avra tnur rats in th stwar industry ar s lw that much

th skills acquird by any ivn wrkr hav bn larnd utsid his r hr currnt

mplyr. Statistically, this phnmnn shws up in th astr wa rwth xprincd

by wrkrs in lar citis (glasr and Mar, 2001). Crtainly, my discussins with stwarwrkrs in Banalr cnfrmd th imprtanc that thy placd n cnnctin with n

anthr t larn nw skills and uncvr nw pprtunitis. That knwld, which is a it

th city, cmplmnts th skills that thy larnd in schl.

Th advanta prximity xplains why thr Indias billinairs cm rm a sinl

cmpany: Insys. Ppl t nrmusly rich bcaus thy wr part a jint ntrpris

that bcam Banalrs scnd larst stwar iant. Insys was undd in 1981, mvd

t Banalr in 1983, and has bn n th aras rat succss stris sinc thn. In th

summr 2008, th cmpany had cls t 100,000 prssinal mplys and a markt

capitalizatin vr 30 billin dllars.17 Tday, th frm is a at wrld phnmnn, with vast

pratins in stwar, bankin srvics, and cnsultin. Its campus in Banalr is tchn-

luxurius, with plnty lush ardnin t rmind yu that yu ar in th trpics.

Insys is ultimatly sllin intllinc prvidd by humans r machins at lihtnin

spd anywhr acrss th wrld. Th cmpany is rularly ratd amn Indias bst

mplyrs, and it is riht t trat its wrkrs wll. Th cmpanys strnth is its human

capital. Th cmpanys undr,Ngv rmo Narayana Murthy, nc said: our assts

walk ut th dr ach vnin. W hav t mak sur that thy cm back th nxt

mrnin.18Th cmpany taks trainin sriusly, rmally trainin thusands ppl ach

yar in its 4,500 capacity trainin cntr in Mysr. In a typical yar, lss than 1 prcnt

Insys jb applicants t a plac in that trainin cntr, makin it mr cmptitiv than

Harvard Univrsity.19

Insys ban in 1981 with svn stwar ninrs, wh wr a lt lss walthy than

thy ar tday. Th ladr that pack was N. R. Narayana Murthy, a Brahmin, brn in 1946

durin th last yars th Raj. H rcivd ninrin drs rm th Univrsity

Mysr and th Indian Institut Tchnly at Kanpur. H spnt th svntis wrkin

as a stwar ninr r Indias tp businss schl, and thn wrkd, briy, r Patni

cmputr systms, in th city Pun.

Patni was a brid cmpany an arly cnnctr btwn th U.S. and India. Its

undrs, Narndra and Pnam Patni, livd in th U.S. Narndra had n t M.I.T. na llwship. His wi, Pnam, st up a back fc in Pun which was n th arly

xampls -shrin stwar. Th svn undrs Insys wr wrkin tthr in

Patnis Pun pratin, whr thy had th pprtunity t larn hw t cnnct Indian

talnt with Amrican markts.

In 1981, ths svn lt Patni t und thir wn cmpany sllin stwar t

Amrican clints. Murthy brrwd 250 dllars rm his wi t cvr xpnss. In 1982,

thy acquird thir frst rin clint Data-Basics, an Amrican stwar cmpany. In 1983,

16 (Marshall, 1920)

17 http://www.insys.cm/abut/wh-w-ar/histry.asp18 http://www.hihbam.cm/dc/1g1-132692533.html

19 http://www.intrnatinalrprtinprjct.r/stris/dtail/hardr-than-harvard/


18/33

17


thy mvd t Banalr t prvid stwar r a bi nw clint: spark plu prducr

MICo (Mtr Industris, C. Ltd.). MICos prsnc in Banalr ritrats th pint that

th city cnnctd ast and wst ln br th ris stwar.

MICo is a subsidiary th Bsch rup, a vast industrial cnlmrat undd by

Stuttart ninr, Rbrt Bsch, in 1886. 120 yars latr, Bsch cntinus t b amn thmst patnt-intnsiv cmpanis in th wrld. In 1954, th frm pnd its Indian subsidiar y

in Banalr, and grman ninrin knw-hw mad its way t India.

Th imprtanc prximity t th sprad idas xplains why MICo wantd Insys

t rlcat t Banalr. Banalr had thr advantas. In ths days, xpnss wr

lwr in Banalr than in Pun r Mumbai. Mst imprtantly,

thr wr mr ninrin clls in th Suth [i.. nar

Banalr] and thir quality was bttr t.20 An abundanc

skilld ninrs mad Banalr attractiv t Bsch in th 1950s

and Insys thirty yars latr.

ovr th past 25 yars, Insys has cntinud t xpand as

a cnduit btwn Indian xprtis and wstrn markts. Th

frm has pnd fcs in th U.S., Canada Latin Amrica and

eurp, yt it has rmaind rtd in its hm city Banalr.

It was n th frms that wrkd t slv th Y2K prblms

that thratnd th wrlds cmputrs. It has bcm a businss

cnsultin frm with mr than ur billin dllars wrth

rvnus. At Insys, smart ppl in Banalr t r ich by slvin

th wrlds stwar prblms. In n sns, th cmpany is a symbl th wrlds atnss.

In anthr sns, it is a symbl th imprtanc bin in th riht plac a city that

succds by makin idas.

Th Insys stry hihlihts th cllctiv natur Banalrs innvatin and th rl

that citis play in cnnctin cuntris. At th binnin, MICo wantd Insys t b in

th sam city, prsumably t imprv th inrmatin ws. Tday, Insys trains thusands

yun stwar ninrs, many whm lav and start thir wn cmpanis, tn

in Banalr. Lik Wipr, Indias thr stwar iant, Insys is a talnt incubatr that has

hlpd t crat a lcalizd pl talnt.

Banalr has xprincd a sl-rinrcin virtuus circl whr an initial advanta

has spirald int ratr rwth. An initial cncntratin frms, such as Insys and TxasInstrumnts, mad th city an attractiv plac r yun talnt t mirat. As th talnt

cam t Banalr, frms als cam, and th talnt itsl brk and st up its wn

cmpanis. A similar prcss, curs, ccurrd in Silicn Vally, whr an initial frm

(Shckly Smicnductr) frst attractd talnt and thn lt that talnt . A brilliant st

yun ntrprnurs frst mvd cllctivly t Fairchild Smicnductr and thn split

t rm a numbr strikinly succssul Silicn Vally frms, such as Intl and Klinr Prkins.

Th initial cncntratin frms and talnt thn attracts urthr cmplmntary

inputs. Fr xampl, vntur capitalists fnd it asir t cm t an almratin talnt.

20 Th qutatin is rm Barthi (2008).

Citis, lik Banalr, ar in

many ways lik schls. Just

as univrsitis almrat

talnt and nabl studntst larn rm ach thr

and ccasinally als rm

prssrs, citis als cnnct

smart ppl wh larn rm

n anthr


19/33

Legum Insiue

18

Amrican and eurpan clints fnd it asir t cm t a sinl city rathr than travl

acrss all India. Ys, it is pssibl t run a call cntr in th middl nwhr, but

hih skilld innvativ wrk unctins bst in a sinl dns lcal. In India, Banalr is th

bist xampl such a lcal.

Tday, th talnt pl traind by Insys is itsl an attractin r yt thr frms. WhnInsys pnd an fc in th Krala Tchnpark, this was sn as a draw r thr

ntrpriss.21 Succssul frms, lik Insys and Wipr, als train wrkrs wh vntually

bcm ntrprnurs thmslvs cratin yt mr mplymnt in Banalr.

21 Iyr, Lakshmi (2008) Punjab and Krala: Rinal Dvlpmnt in India, Harvard Businss Schl Cas 9-707-008.


20/33

19

chaptEr 4

THe RooTS oF

BANgALoReS SUCCeSS:

eDUCATIoN, INFRASTRUCTURe

AND AMeNITIeS

Asia is ull citis. What rcs dtrmin which ths placs xpld as nins

cnmic rwth? Hn Kn and Naasaki wr atd r thir rls by acts vrnmnt.

Th Tkuawa rbad eurpans rm in anywhr ls but Naasaki. Th British prtctd

Hn Kn. But what maic mad Banalr int Indias inrmatin tchnly capital?

Banalrs backrs will aru that Banalrs climat is mr tmprat than that

much India and surly that is a hlp. Atr all, Shckly himsl was drawn t Silicn Vally

by its tmprat Mditrranan climat (as wll as th prsnc his mthr). Mrvr, r

mr than a cntury Banalr has trid t hav tchnly-rindly inrastructur, such as its

arly hydrlctric dam, althuh mst ntrprnurs I spk t wr lss than nthusiastic

abut th quality that inrastructur. Th industrial clustrs, lik

th elctrnics City assmbld by KeoNICS wr surly hlpul

in prvidin rlativly d inrastructur. Ths fc parks may

crat sm almratin bnfts, but vn mr imprtantly,thy prvidd sl-cntaind urban units with accss t mdrn

public srvics.

Yt, cmparin Banalr with thr dvlpd, and vn

many dvlpin placs, susts that it is th human capital, nt

th climat r inrastructur that is unusually d. Indd, it can

crtainly b arud that n th ky rasns why Banalr

spcializs in stwar is that stwar rquirs much lss

inrastructur than traditinal manuacturin. Rads ar lss imprtant. Cmmunicatins

tchnly is prvidd privatly; Txas Instrumnts wnt s ar as t us its wn satllit

dish t mv stwar back and rth btwn th U.S. and India in th arly days. on

on th ky rasns

why Banalr spcializs

in stwar is that

stwar rquirs much

lss inrastructur than

traditinal manuacturin.

Rads ar lss imprtant


21/33

Legum Insiue

20

th attractiv thins abut stwar in a dvlpin cuntry is that th phmral natur

th prduct maks it lss vulnrabl t public sctr ailurs.

Skills ar th bdrck n which Banalrs rwth rsts. Citis that thriv as cntrs r

ida cratin succd by cnnctin smart ppl. An initial krnl ninrin xpr tis

attractd frms, lik Insys, which thn startd a virtuus circl whr smart cmpanis andsmart wrkrs cm t a city t b cls t n anthr. In th U.S, w s this prcss

in th strn cnnctin btwn skills and city rwth shwn in Fiur 1. Acrss Indian

rins, Arra and Bad (2006) shw a strn cnnctin btwn ninrin studnts

in 1988 and th rwth th stwar industry btwn 1990 and tday.22 Just as skills

prdict th succss Amrican citis in th inrmatin a, skills xplain which Indian citis

hav manad t succd in stwar.

I hav alrady discussd th arly rts human capital invstmnt in Banalr.

Cmpulsry ducatin cam arly t th stat and th Maharajahs, aln with Sir MV,

strnly supprtd schlin. Sir MVs mtt was industrializ r prish, but instad

just pushin bi inrastructur , h mphasizd th ducatin ndd t build ths prjcts

fcintly.23 In th U.S. and eurp, ducatin was rarly linkd t industr ializatin. Atr all,

n th bi pints txtil mills and assmbly plants is that thy culd us rdinary

ppl, nt skilld artisans. Th Amrican hih schl mvmnt ban in walthy, rural

Iwa, nt industrial Chica. But r Sir MV, industrializatin mant trainin th ninrs

wh wuld knw hw t imprt tchnly rm th wst. Sinc schls wr a ncssary

inrdint in his plan t industrializ India, h undd bth th

Univrsity Mysr and Banalrs ninrin cll, which

nw bars his nam. Ths schls wr th star tin pint r th

clustr ducatd ninrs that prsists t this day.

Tday, thr is an astnishin dnsity ninrin studnts

in th aras arund Banalr. Fitn prcnt Banalr has

sm rm pst-scndary dr, which is abut dubl th

rat r Karnataka and India as a whl.24 In 2004 2005, thr

wr 750,000 ninrin and tchnical studnts in India. o

ths, 97,000 wr in Karnataka and 170,000 wr in nihbrin Tamil Nadu.25 Ths tw

stats, which tthr hav abut 10 prcnt Indias ttal ppulatin, hav mr than 35

prcnt th cuntrys ninrin studnts.

Th human capital Banalr is nt just a prduct rmal ducatin, but als skills larnd utsid schl. Tday, th skills th stwar industry ar acquird by

wrkin in that industry, but sm Banalrs arly d in human capital cam rm

its rl as a cntr r thr rms hih tch industry, lik Hindustan Arnautics. Ths

riinal hih tch mplyrs hlpd attract a critical mass ninrs t Banalr, which

thn bcam a sl-rinrcin prcss sinc human capital-intnsiv frms, lik Wipr,

Txas Instrumnts and Insys, cam r th wrkrs and mr wrkrs cam r accss

t ths frms.

22 http://paprs.ssrn.cm/sl3/paprs.cm?abstract_id=964465)

23 http://www.karnataka.cm/prsnalitis/visvsvaraya24 Cnsus India, 2001.

25 http://mspi.nic.in/rpt%20_%20pubn/sa_ab_2007/sa_06_ducatin.pd

Skills ar th bdrck n

which Banalrs rwth

rsts. Citis that thriv as

cntrs r ida cratin

succd by cnnctin

smart ppl


22/33

21


Th imprtanc skills is shwn in th cnnctin btwn skills and city rwth in

dvlpin cuntris and th cnnctin btwn skills and th stwar industry in India.

Th imprtanc is als shwn by th act that wrkrs arn mr

mny whn thy labr arund skilld ppl. Tday, hldin an

individuals wn yars schlin cnstant, that prsns incms up by iht prcnt, n avra, as th shar cll

raduats in that prsns mtrplitan ara riss by 10 prcnt

(Mrtti, 2004). Thus, th xpctd incm r smn with

xactly 16 yars schlin is prdictd t b abut 24 prcnt

hihr i that prsn wrks in a city, lik Minnaplis, whr 41.4 prcnt yars adults

hav cll drs, than in Clvland, whr 12.5 prcnt adults hav cll drs.

Ths human capital xtrnalitis tak many rms, and thy ar at wrk in Banalr.

on rasn r human capital xtrnalitis is that ppl larn rm ach thr and

bcm mr skilld thruh prximity t ppl with skills. In Banalr, this shws up in

th yun stwar ninrs wh acquir skills wrkin at frms lik Insys r MindTr. A

scnd rasn r human capital xtrnalitis is that th prducts invlv jint prductin,

and s n prsns utput may b cmprmisd i h r sh is wrkin with lss-qualifd

partnrs. Th xtrm this phnmnn ccurrd in th aulty -rins that bruht dwn

th spac shuttl; ttin n minr part wrn was nuh t scuttl a hu ntrpris

(Krmr, 1993). In th cas Banalr, stwar ninrs wrk with ach thr t

prduc cd, and n litch can cmprmis an ntir prram.

Th hart Banalr is its stwar industry, but that industry itsl nly mplys a

mdst numbr th aras mplys. In an intrviw, n inrmatin cmpany ladr

stimatd that ach n his wrkrs is rspnsibl r prvidin iht mr jbs in

th rin. Thuh thr is n way t vriy this numbr, it wuld b ar hihr than any

quivalnt U.S. numbr. Thus it hihlihts a way in which Banalr is quit dirnt rm

Silicn Vally.

Santa Clara Cunty, Calirnia, is a rich plac, whr hih husin csts mak it xtrmly

inaccssibl t prr Amricans. As a rsult th stwar millinairs in Silicn Vally may

buy xpnsiv cars and huss, but thy, nrally, d nt mply vast amunts lw-

skilld labr, ithr at th cmpany r at hm. Banalr is dirnt. India has vast numbrs

th pr, and Banalrs wn land us rstrictins d mr t hindr th cnstructin

buildins r th prsprus than dwllins r th pr. Prr Indian urbanits tnrsid in xtrardinarily dns, xtra-lal dwllins. Sinc th vrnmnt is nt capabl, r

intrstd, in nrcin its land us rulatins n Indias slums, ths slums can hus vast

numbrs Indians, ivin thm accss t th cnmic pprtunitis rwin urban

aras lik Banalr.

Th prsnc th multituds prr wrkrs crats trmndus challns r

th city, which I will discuss in th nxt chaptr, but als hlps dfn Banalrs cnmy.

Whil Silicn Vally is smthin a millinairs nclav, Banalr is nt. Th Indian city

is a vry mixd city with vast numbrs prr Indians wh wrk, particularly, in prsnal

srvic jbs. Whil it isnt bvius that a pr Amrican culd cm t Pal Alt and fnd

pprtunity, th mixd jbs Banalr appar t crat much mr a laddr r rural-

Th prsnc th

multituds prrwrkrs crats trmndus

challns r th city


23/33

Legum Insiue

22

urban mirants. Banalr is ull small ntrprnurs wh ithr amassd capital thruh

arly wa-arnin r thruh thir amilis, and ar radually risin by runnin small shps

r rstaurants. Ultimatly this cnmy is buyd by th hihly skilld ninrs dalin with

th utsid wrld, but thr is plnty intrnal ntrprnurship as wll.


24/33

23

chaptEr 5

PoLICY LeSSoNS AND

CHALLeNgeS

Banalrs succss tuchs n ur dirnt plicy sphrs. First, th rl KeoNICS

raiss th qustin industrial plicy. Did th vrnmnt chs stwar and did that

chic mak Banalr? Scnd, th rwth th city lads t qustins abut urbanizatin

in th dvlpin wrld. Shuld citis b ncurad r rstrictd? Finally, th vry succss

th city and th vast w mirants crat challns in prvidin basic urban unctins

such as ast cmmuts and clan watr. I will addrss ths thr plicy aras in turn.

Banalr, Industrial Plicy and educatin

Banalr is crtainly a succss, and th natural ractin t such a succss is t try t us it

as a mdl r thr citis. But this wuld b a mistak sinc many Banalrs attributs

hav had littl t d with its succss. At th ridiculus xtrm, n n culd claim that

Banalrs cnstd rads playd sm maical rl in makin th city succd. Surly,

th ppsit is tru, and Banalr succds dspit its cnstin, nt bcaus it. It is

nly whn th xampl Banalr can b cmbind with knwld land rm urban

dvlpmnt lswhr that rliabl lssns can b drawn.

Fr xampl, th cnnctin btwn ducatin and Banalrs succss is backd bycrss-stat statistical wrk in India and lswhr. Th strn statistical cnnctin btwn

ninrs and rwth in th stwar industry acrss stats supprts th imprtanc

this channl. Th act that ducatin is strnly assciatd with urban succss and innvatin

in thr cuntris urthr buttrsss this intrprtatin Banalrs achivmnts. Finally,

th crss-cuntry wrk n ducatin and cnmic rwth prvids a last bit supprt

r th ducatin intrprtatin Banalr.26

Thr is, hwvr, lss vidnc supprtin th viw that Indian industrial plicy playd

a majr rl in Banalrs rl as a stwar capital. Fr xampl, th sam statistical

26 http://paprs.ssrn.cm/sl3/paprs.cm?abstract_id=964465


25/33

Legum Insiue

24

wrk that cnfrmd th imprtanc ducatin und a nativ crrlatin btwn

stwar rwth and lad industrial utput.27 elctrnics prductin in 1990 had nly a

marinal impact n subsqunt xpansin in th stwar industry. Ths rsults shuld

mak us wary abut attributin Banalrs currnt succss t th pst-war public sctr

dvlpmnt havy industry and lctrnics in Banalr.Mrvr, thr is an abundanc data sustin th

prblms with stat ld industrial dvlpmnt. India itsl, which

stanatd r dcads br cnmic libralizatin, has tn

bn a primary xampl th csts tryin t micr-mana

th rwth prcss. evn in Japan, whr industrial plicy at last

smd t b mr succssul, th bst vidnc shwd that

stat plannrs t thins wrn. Basn and Winstin (1996)

dcumnt that Japans vauntd Ministry Intrnatinal Trad and Industry (MITI) nrally

pickd lsrs. In Banalr as wll, at last sinc 1980, th rwth nin has bn ld by

privat ntrprnurs nt publicly supprtd ntrpriss.

Whil it is hard t fnd d arumnts r ld styl industrial plicy, th cas r

public supprt industrial parks, lik KeoNICS lctrnics city, is mr dbatabl. on n

lvl, th amiliar arumnts rsurac. Will th vrnmnt actually b any d at pickin

winnrs? Wnt public fcials just atr th latst ad, whthr r nt thir rin has

any cmparativ advanta in th activity? Can th public sctr rally micr-mana th

unprdictabl intractins that mak urban almratins spcial?

on th thr hand, i th public sctr cant prvid dcnt inrastructur vrywhr,

and i thr is clarly privat dmand r a small island d srvics ddicatd tward a

particular industry, thn thr is mr a cas r such parks.28Thr may b almratin

bnfts, but vn mr imprtantly, such cntrs may prvid th nly chanc prvidin

cuttin d frms with dcnt inrastructur. Th scnd arumnt is strnr than th frst

bcaus it isnt bvius that cncntratin frms is th riht straty, vn whn such frms

nrat lts raphically cncntratd spillvrs. I th frms all lcat tthr thn it

is mr difcult r thm t larn rm and tach thr industris.

Th prsnc almratin cnmis dsnt imply that

th bnfts that cm rm cncntratin frms utwih th

bnfts disprsal (glasr and gttlib, 2008).

Hwvr, th bnfts havin at last smwhr whr thrads ar pavd and lctricity runs sm clarr. Sinc dirnt

industris nd dirnt public srvics, it may b apprpriat

t hav industrially spcializd raphic rins that dlivr th

srvics ndd by particular frms. o curs, this arumnt dsnt sust th nd r

subsidy. I ths frms ar rally prductiv thn thy shuld b abl t pay r th sr vics.

But it ds sust that whn vrnmnts cant prvid vrythin vrywhr, thn

industrial parks may b a way prvidin smthin smwhr.

27 http://paprs.ssrn.cm/sl3/paprs.cm?abstract_id=96446528 Laura Alar and Lakshmi Iyr (2009) Spcial ecnmic Zns in India: Public Purps and Privat Prprty Harvard

Businss Schl Cas 9-709-027.

Acrss cuntris thr is an

almst prct rlatinship

btwn incrasin walth

and livin in citis

Th prcss India

bcmin walthy will

invariably invlv th

cntinuin rwth lar

citis lik Banalr


26/33

25


This is th rlativly bnin intrprtatin I wuld put n th Banalr industrial cntrs

and sust that thy can b a mdl as ln as thy ar ivn a limitd intrprtatin. Sinc

s many citis in th dvlpin wrld lack widsprad, hih quality inrastructur, it may b

apprpriat t dvlp spcializd aras that catr t frms that nd that inrastructur.

But ths aras shuld b sl-fnancin, and, as in th cas elctrnics City, thy willprbably unctin bst i thy ar privatly manad.

Banalr and Urbanizatin

Banalrs succss als shds liht n why dvlpmnt and urbanizatin ar s clsly

linkd. Histrically, t many Indian plicymakrs hav accptd gandhis lin that I India is

t attain tru rdm and thruh India th wrld als, thn snr r latr th act must

b rcnizd that ppl will hav t liv in villas, nt in twns, in huts, nt in palacs.

29 As Fiur 3 illustrats, acrss cuntris thr is an almst prct rlatinship btwn

incrasin walth and livin in citis. Within cuntris as wll, th crrlatin btwn city-

siz and incms is xtrmly rbust, particularly in th dvlpin wrld.

Figue 3: relionsi Beween Inesing Wel nd Living in ciies

0

30

60

70

40

10

4

Log of Gross Product per Capita, 1998

PercentofPopulationLivinginUrbanAreas,

1998

Bulgaria

5 6 7 8 9 10 11

80

90

100

50

20

Armenia

Austria

Australia

Central African Republic

Chile

Bolivia

Bosnia and Herzegovina

Bahamas

Channel Islands

BelgiumAruba

Comoros

Bangladesh

Botswana

BarbadosChad

Canada

Albania

Angola

Congo, Rep.Azerbaijan

Argentina

Burkina Faso

Cambodia China

ColombiaBelarus

Brazil

BelizeBhutan

Cape Verde

Ths acts d nt man that rural armrs such b rcd t mv t citis r

that th vrnmnt shuld artifcially inat th siz citis, but it ds imply that

th prcss India bcmin walthy will invariably invlv th cntinuin rwth

lar citis lik Banalr. Atr all, th cnnctin btwn cnmic dvlpmnt and

urbanizatin is nt just a statistical rularity, but als a mattr basic cnmics. on

rasn r th assciatin btwn urban rwth and dvlpmnt is that imprvmnts

in aricultural tchnly ar nrally labr-savin, and as a rsult, wrkrs lav th

arms as cuntris bcm mr dvlpd. Th scnd rasn is that dvlpmnt

29 Frm a lttr rm gandhi t Prim Ministr Jawaharlal Nhru n octbr 5th, 1945.


27/33

Legum Insiue

26

invlvs th switch labr t ds, in which citis hav a cmparativ advanta in

bth prductin and distributin.

Banalr illustrats this claim. Th citys ldr industris xplitd traditinal urban

advantas, lik th ability t xplit rturns t scal in lar actris. Banalrs Binny Mills

was n a ln sr is lar txtil prducin cmpanis. Bi citis wr natural placst put ths actris bth bcaus citis had th labr rc t man thm, but als bcaus

citis had thr inputs. In th cas Banalr and txtils, lctricity was critical. Citis

hav als typically sat at th cntr transprt ntwrks which

mad it asy t imprt inputs and xprt th fnishd ds.

Whil many prnsticatrs thuht that th switch t

inrmatin-intnsiv srvics wuld liminat th advantas

citis, Banalr illustrats that ths sctrs ar particularly

prn t lcat in dns urban aras. It is tru that th traditinal

transprtatin inrastructur is rlativly unimprtant in th cas

stwar. Bals cttn ar nt bin shippd in, and rams

clth ar nt bin shippd ut. Prhaps th mst imprtant

transprtatin-rlatd advanta that Banalr njys is its airpr t, with dirct accss t

airprts thruhut th wrld that nabls clints and invstrs t cm t Banalr.

Th airprt is imprtant, but th mst imprtant rasn why th stwar industry is

s cncntratd in placs lik Silicn Vally and Banalr is that th industry is nrmusly

cllabrativ. Th prductin idas always is, bcaus th ability t larn rm n anthr

may b humanitys ratst asst. Crtainly, it is pssibl t writ cd n an islatd hill-tp,

but th writr dsnt larn much in islatin. Instad, innuity is maximizd is by wrkin

tthr and thn brinin th knwld n cmpany t a nw mplyr. In sm

cass, lik th glplx, many ths intllctual cllabratins can b strd within

a frm, but as Saxnians (1996) analysis Silicn Vally and Bstns tchnly clustr

n Rut 128 maks clar, many th mst imprtant advantas ccur acrss frms.

Cncntratin nhancs prductivity bcaus it incrass th w idas.

Th wrlds utput is likly t bcm mr inrmatin intnsiv vr tim and that

will nly mak citis mr imprtant. It is asir t cnnct vr ln distancs, but thr

will always b a sliht d assciatd with mtin in prsn. Atr all, human bins

hav vlvd t acquir a rat dal inrmatin rm ac-t-ac mtins. As ln as

mtin in prsn ivs sm d, thn th mst inrmatin intnsiv frms will cntinut b drawn t urban almratins lik Banalr.

In th cas th dvlpin wrld, th advantas urbanizatin ar vn ratr

bcaus citis ar th placs that cnnct pr and rich cuntris. Indias stwar industry

is particularly inrmatin intnsiv, which maks it s naturally urban, but vn in ds-

prducin sctrs in th dvlpin wrld, citis crat advantas bcaus thy ar th

ntry pints r rinrs. Whil matur industris will always lav citis and mv t

lwr cst aras, th cuttin d industry will dpnd n th nwst idas and ths

ar asir t accss in urban aras.

gandhis visin India was xtrmly static. H nvisind a land indpndnt

armrs, spinnin thir wn thrad. Whil thr may b spiritual bauty in that visin, it

In th cas th dvlpin

wrld, th advantas

urbanizatin ar vn

ratr bcaus citis ar

th placs that cnnct pr

and rich cuntris


28/33

27


is nt a rcip r cnmic dvlpmnt and th bnfts, such as halth and lnvity,

which cm with that dvlpmnt. Cnnctin and knwld ar th harbinrs

dvlpmnt and citis mak ths thins pssibl.

Banalr and City Srvics

As such, I s littl t lik in plicis that artifcially limit th rwth Indias citis. Yt th

cntinuin rwth Indias ma-citis, lik Banalr, will cntinu t crat thir wn

prblms. givn all th cnmic advantas urban cncntratin, it is mr snsibl t

addrss ths prblms dirctly rathr than t try t slv th prblms by limitin rwth.

Whn pr armrs cm t citis, thy hav a bttr chanc bcmin prsprus, but

rat miratin ws d crwd urban inrastructur, causin dtriratin in watr quality,

cnstin and limits n husin. Th tru urban anda is t imprv th public sctrs

prrmanc in ths aras.

Th nd r a capabl public sctr incrass dramatically whn lar numbrs

ppl crwd int a small land ara. Human bins impact n anthr, bth psitivly

and nativly, whn thy liv in cls quartrs. Sm ths intractins ar bnin,

but thrs ar lss s, such as th impact that n prsns rus has n th quality

smn lss drinkin watr r th impact that n prsns

drivin has n th trafc tims vryn ls n th rad. In

citis, ppl nrat nativ xtrnalitis twards n anthr

and ths rquir sm rm public manamnt.

In many citis, crim prvids a particularly bvius xampl

advrs intrprsnal intractins, and n n wuld dubt

th nd r a cmptnt public sctr t prtct li and limb.

Indias citis ar rlativly sa, which may rct wll-unctinin

scial rups mr than th plic. Whatvr th rasn, crim is

nt th rat prblm urbanizatin in India.

Prhaps th mst prssin public sctr prblm in Banalr

and thr Indian citis is th prvisin dcnt swa and clan

watr. Th limitatins th watr systm ar illustratd by th

lar numbrs ppl in Banalr wh us rund watr (n stimat is 30 prcnt),

which is xtrmly pllutd.30 Banalr ds hav accss t narby rivrs, but th watrthat is pipd in is tn als lw quality. Th public halth cnsquncs watr-brn

disass mak this a prssin prblm r Banalr and much urban India.

Th prblms watr ar, curs, linkd t limitatins th swa systm. In

many dvlpin cuntris, swa pips intrminl with th watr supply spradin

disas. In thr cass, tilts ar s limitd that ppl tn just dcat n th rund.

In n study rm th 1990s, 100,000 rsidnts Banalr wr und t b sharin 19

public tilts.31 Prvidin dcnt swrs and clan watr is xpnsiv and difcult, but it may

b th mst imprtant task acin rapidly urbanizin aras.

30 http://www.indiawatrprtal.r/data/datastats/ka/gWQualityIntr.pd

31 http://unpan1.un.r/intradc/rups/public/dcumnts/APCITY/UNPAN020773.pd

gandhis visin India

was xtrmly static.

H nvisind a land

indpndnt armrs,spinnin thir wn thrad.

Whil thr may b

spiritual bauty in that

visin, it is nt a rcip r

cnmic dvlpmnt


29/33

Legum Insiue

28

Banalr als acs a trribl cnstin prblm, which itsl, curs, can b

undrstd as th natural rsult t many ppl tryin t us t littl rad spac. on

surc stimats avra cmmut tims at arund 40 minuts, which is lss than Mumbai

but still lnr than any Amrican city. 32 Th rlativly disprsd natur mplymnt in

th city mans that it can tak an hur r mr t t rm n tchnly frm t anthr.Ths hih tim csts ar nt as thratnin as watr-brn disass, but thy ar a srius

urban disamnity.

Th city is currntly buildin a train systm, but it sms unlikly that this systm will

allviat th citys cnstin prblm. Atr all, Banalr is likly t cntinu rwin and

millins ppl will still us th rads. Mrvr, trains ar an xtrmly xpnsiv mans

prvidin public transprtatin, and thy will hav difculty cnnctin th disprsd wb

frms within th city. Imprvd manamnt Banalrs rads is crtainly ndd.

Th mst cst ctiv mans rducin cnstin is t mak bttr us th

xistin rads inrastructur, which wuld rquir cmbinin bttr bus srvic with a

cnstin char. Cnstin chars nsur that th usrs public rads rcniz

th scial csts thir actins. Sinapr institutd such a char in 1975, whn it was n

mr dvlpd than Banalr is tday, usin a simpl nn-lctrnic systm. Lndn has

achivd imprssiv rsults with its cnstin charin systm as wll. Th rat advanta

cnstin charin is that it has th capacity t dirctly impact th caus th prblm:

vrus rads. Subsidizin altrnativ mans travl, lik trains, is at bst an indirct and

xpnsiv mans achivin th sam nds.

on prblm with cnstin pricin in Banalr is that a rasnabl char will mak

th rads t xpnsiv r many prr rsidnts th city. Th bst way t slv this

prblm is t us th cnstin char rvnus t incras bus srvic, as Lndn has

dn. By crwdin mr ppl nt lar buss, th rads will

b usd mr fcintly withut th nrmus xpns a rail

systm.

Banalr is cmptin nt nly with thr Indian citis but

als with placs thruhut th wrld. Many Banalrs mst

imprssiv ntrprnurs culd asily mv t Silicn Vally. Th

cnmic pprtunitis in Banalr hlp kp thm in India,

but quality li mattrs t. I Banalrs strts bcm t

impntrabl r i disas bcms t prblmatic, thn skilldppl will lav. In a sns, quality li plicis ar rally bttr

sn as cnmic dvlpmnt plicis.

A fnal majr ara is husin. Th attractivnss Banalr

als dpnds n th quality and ardability its husin stck.

Husin is bst prvidd by th privat sctr, but invitably th vrnmnt plays a majr

rl, tn cratin rulatins that rduc husin supply and incras prics. Mumbai,

r xampl, surs nrmusly rm an absurdly dracnian land us systm that radically

rducs hihts in cntral aras. Banalrs ruls ar nt narly as bad as ths in Mumbai,

32 http://www.payscal.cm/rsarch/IN/City=Banalr/Cmmut_Tim

I Banalrs

strts bcm t

impntrabl r i disas

bcms t prblmatic,

thn skilld ppl will

lav. In a sns, quality

li plicis ar rally

bttr sn as cnmic

dvlpmnt plicis


30/33

29


but th city still culd d mr t imprv its land us plannin and spcially t prmit th

dvlpmnt mr districts markd with hihr buildins. gin up is a d substitut

r in ut, and th lvatr can b a astr rm transprtatin than th car.

As a cncludin thuht, it is wrthwhil askin whthr

Indias vrnmntal systm is wll suitd t th challns acinits citis. Much th public pwr vr Banalr is ldd in

th hands th Karnataka stat vrnmnt. That vrnmnts

primary cnstitunts ar still rural. As a rsult, th vrnmnt

may b lss likly t put th nds its citis frst. Th situatin

has bn xacrbatd by th dlay in rdistrictin which causd

stat lislaturs t undr-rprsnt thir rwin citis r many

yars. Thr is at last a cas r cnsidr in mr dvlutin pwr in India t its lar

citis. Many Indians will aru that Dlhi is nw a mr plasant plac bcaus th city has

mr dirct cntrl vr its public srvics.

Prvidin dcnt swrs andclan watr is xpnsiv and

difcult, but it may b th

mst imprtant task acin

rapidly urbanizin aras


31/33

30

CoNCLUSIoN

Banalr is an xtrardinary plac that has dn as much as anythin t chan th

wstrn ima India. It is a city built n knwld and human capital. Its dns labr

markts cnnct smart wrkrs t smart frms. Idas w radily bth acrss ntrprnurs

and acrss stwar writrs. Th city als prvids ppr tunity t

lss skilld wrkrs wh ar abl t supply srvics r th aras

primary xprt industris.

In a sns, Banalr is a mdl hw an urban almratin

can brin prsprity t a pr cuntry. Th city cnncts India

with th utsid wrld, and it is a cntral cnduit r th w

knwld. Th dnsity th city thn nabls that knwld

t w acrss wrkrs. Its strnth lis in a hihly cmptitiv, hihly ducatd, hihly

ntrprnurial wrkrc that has bn ivn accss t ach thr and t th utsid

wrld in that city.

Banalrs succss ds nt rct th industrial plicy th pst-war ra. Th

subsidizatin havy industry in th city cr tainly bstd its ppulatin r a whil, but th

rcnt rwth th city has privat rts. Th primary public cntributin t Banalrs

succss is invstmnt in ducatin. Th advantas citis bcm ratr whn thir

inhabitants ar skilld and hav mr t larn rm n anthr. Banalrs succss shuld

rmind us that ducatin is th mst imprtant cnmic dvlpmnt plicy.

Yt th quality li prblms in Banalr als rmind us that Indias public sctrhas a ln way t t mak it th qual th cuntrys privat sctr. Clan watr,

bttr swa and lss cnstd rads ar all majr bjctivs. Prhaps ths als can b

achivd with th currnt vrnmntal systm, but it may als mak sns t cnsidr a

ratr dcntralizatin public pwr t mak lcal vrnmnts mr accuntabl t

thir systms and t allw mr innvatin in th public sctr.

Banalr is a mdl

hw an urban almratin

can brin prsprity t a

pr cuntry


32/33

31

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ReFeReNCeS


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The Legatum Institute is proud to publish this insightful study about one of Indias mostdistinguished cities. Harvard Universitys Edward Glaeser, a well-known commentator

on urban issues, considers the historical path that brought this city from a small urban

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