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Cities of the Future: Fastest Growing ‘Megacities to be’ are in India

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Megacities— metropolitans with populations in excess of 10 million inhabitants concentrate significant economic weight in their respective countries. Our Passport Cities database predicts the future Indian megacities of Bangalore, Hyderabad and Chennai to record the fastest rate of real GDP growth over 2016-2030. The above mentioned cities, whilst still not home to 10 million inhabitants as of 2016, are set to join the ranks of existing megacities some time over the period 2017-2030. This article follows on from the Strategy Briefing, Cities of the Future: Emerging Market Champions which aims to highlight the increasing competitive nature of developing cities in the global context.

Technology driven enterprises steer economic growth

For many Indian cities, the engines of economic growth have been their technology industries in IT and software development. Bangalore is often branded as India’s Silicon Valley thanks to its flourishing high-tech industries which have helped the city become one of the country’s major hotbeds for outsourcing. As well as accounting for around 35% of India’s IT companies, Bangalore is also home to a large number of educational institutions which help supply the city with a large number of IT and software development specialists.

Hyderabad is following in the footsteps of Bangalore, positioning itself as India’s next major technology and entrepreneurial hub. One of the biggest developments has been T-bub— India’s largest start up ecosystem which opened in 2015 and is set for further expansion by 2018. Finally, Chennai, whilst also having a strong background in IT, is a more evenly balanced economy, with thriving industries in banking, finance and manufacturing. It is often labelled as the ‘Detroit of Asia’ as Chennai accounts for approximately 60% of the country’s automobile exports.

Smart City projects imperative to the effective functioning of megacities

As cities grow in population, a range of urban challenges can make cities the victims of their own success. Overcrowding, high vehicular traffic and air pollution are just some of the hurdles city dwellers stumble upon when existing infrastructures are not upgraded to meet increased population demand. Smart City schemes aim to integrate information communication technology (ICT) and internet of things (IoT) solutions to ensure a city’s efficient functioning. For example, Panasonic is building a new suburb in Tokyo geared towards smart living called ‘Fujisawa Sustainable Smart Town’. The project which is set to be completed by 2018, will contain 1,000 living spaces all with integrated smart capabilities. According to Panasonic, these homes will emit 70% less CO2 compared to 1990 levels and produce up to 30% of its energy from renewable sources. A wide range of other smart initiatives such as air pollution and traffic sensors are being utilised across a vast array ofglobal cities today and will play an important role in the efficient functioning of new and emerging megacities.

Hyderabad and Chennai still playing catch up to existing megacities

Chennai and Hyderabad and to a lesser extent Bangalore, will still remain less wealthy compared to the vast majority of existing megacities, despite the investment opportunities their economic growth will bring. For example, Chennai’s GDP per capita in 2030 will still be 34% below that of Delhi’s and around seven times smaller compared to the Chinese megacities of Shenzhen and Guangzhou. Investment risk will preside more so in the tier two cities of Chennai and Hyderabad compared to Bangalore or other major economic centres of the country such as Delhi and Mumbai.

Forecast disposable income and GDP per capita averages in 2030


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