During the era of our forefathers, much that one earned was spent on food, and farming was the primary occupation. Developments in agriculture over time enabled feeding a seven-fold population living twice as long while employing a smaller share of farm-hands. The need for clothing was equally compelling. Textile making spawned artisanship and eventually mechanization, but required large tracts of land and many people to rear sheep for wool or farms for cotton. It was only in the 20th century, with the emergence of middle class consumption of durable consumer goods that suburban auto-towns and steel cities mushroomed in many countries. People moved out of villages into factory sheds. The world in which we live now is sometimes described as post-industrial, since the bulk of the expenditure is on housing, health, education, communication and entertainment. Cities are the natural habitat for such a society.
As engines of the economy, the manner in which our cities function is critical to the fate of our nation and region. We discuss this in the context of Kolkata.
Anecdotally, as development models, one hears eulogizing references to the Gujarat/ Mumbai model of growth of big investment in infrastructure to attract large manufacturing industry, and also of a Bengaluru model of IT-led growth. Both models are appealing, but like any person or firm, each city has unique resources and talents. These capabilities are built over time and seeking to leverage them is more sensible than adopting a path that someone else has succeeded in.
Mumbai is India’s financial capital. It is the home of large corporations, the stock market, bulge-bracket investment banks and law firms. Maharashtra and Gujarat attract the highest foreign investments, ship the most goods through their ports and generate many jobs for people. Is this a journey that Kolkata, wishing to generate jobs and attract capital, can emulate?
Mumbai’s strength is derived significantly from hosting two incredibly entrepreneurial communities, the Parsis and Gujaratis, but Bombay, as it then was, really pulled ahead during the 1860s due to a host of favourable factors. The US Civil War that broke out in 1861 halted US cotton production and massively raised the demand in the UK for Indian cotton, most of which was grown around Bombay. This created the need for modern domestic logistics to bring goods and people into the entrepôt. The sunrise industry of the day, railway companies, found ready business in transporting cotton to Bombay.
The construction of the Suez Canal (1869) made Bombay the shortest and cheapest route to Europe, increasing its stature as a business capital. Such economic activity created industrial firms, mainly cloth mills and equipment manufacturers. The need for capital catalyzed the formation of the Bombay Stock Exchange, the first equity trading platform in Asia. Bombay not only emerged as a cosmopolitan melting pot of cultures and nationalities, but a city where the private sector played a predominant role. In an environment of private sector-led innovation, management and capital learned to be flexible.
For instance, the Bombay-based Tata group, for much of the 20th century India’s largest company, first earned capital through the opium trade but invested proceeds first in textile and then went on to found industrial firms manufacturing steel and automobiles, and later technology-based services companies.
Bengaluru’s evolution as an IT hub is remarkable but the seeds of a culture of technology were sown by the Indian Institute of Science in 1909, and nurtured by an environment of scientific thinking by India’s space research centre and nuclear science programme. This led to firms being set up that recruited technocrats, and many engineering colleges mushroomed, including private colleges not in the league of IITs, but these institutions could assure students of employment. Resistance to adopting Hindi in the southern states also meant better spread of the English language. These factors were tailor-made to benefit from the IT boom that made Bengaluru not only the headquarters of Infosys and Wipro, but also a hub of venture capital firms that fund start-ups and of a buzzing social scene that helps the young workers meet and network.
While certain strengths engender capabilities that transition smoothly to subsequent economic environment, other strengths create rigidities that are difficult to overcome.
Calcutta was the trading hub of the British, and developed competitive advantages in the major industries of the 19th century. Jute, indigo and tea were large export-oriented industries of India and Calcutta was the headquarters for these business enterprises. As the nation’s capital, Calcutta was the seat of power and the heart of European commerce. European managing agency firms sprang up in the city. Indian capital had a ready avenue for investment in bidding for zamindari rights across large portions of the fertile regions of the country. Calcutta emerged as the second city of the British Empire, forming the world’s first Supreme Court to settle disputes through English Common Law, set up modern insurance firms and gave rise to the Bank of Calcutta, forerunner of the State Bank of India. Grand hotels and country clubs were set up in the city to cater to the needs of expatriates.
However, industries such as jute dwindled (it was no longer an indispensable packaging material) leading to large exodus of talent and capital. Managing agencies and the zamindari system were outlawed due to their inherent inequities, and the export-oriented business opportunities depended on connections of expatriate management that fled after independence. Bengal’s role during the independence struggle made it unsuitable as a capital city, mitigating its vitality. While finance and management relocated, factors of production such as land and labour remained rigid. The partition of the nation and the advent of radical left-wing extremism, extinguished the last flickers of enterprise.
It is in this context that the rebuilding of institutions needs to be considered. The city’s history is replete with grandeur, but today’s environment requires it to re-invent itself based on its current capabilities, not to retro-fit existing industries and employees in the hope that halcyon days will return.
Kolkata has inherent advantages that are quite relevant to a 21st century economy.
A 500-kilometer radius around the city is home to 370 million people. Contrast this with Mumbai (155 million), Bengaluru (181 million) or even Beijing (205 million). Perhaps no city has a ‘catchment’ of so many people. Kolkata has the potential to serve as the urban hub for this population and cater to their health, education and transport needs. This requires service offerings appropriate to the purchasing power by building relevant capacity. The Kolkata airport can be a regional transport hub but requires pre-existing spokes of air, road and rail connectivity across the region to generate the requisite traffic.
The benefit of being in a population centre is already clear for trading firms which can reach many more people for their wares, and this is why food, medicines and FMCG businesses tend to thrive. Where distribution costs are significant, the opportunity to distribute to many nearby areas is compelling, but the opportunity can be scaled up to more industries given appropriate focus.
Kolkata is home of the Bengali media; music and films have long been part of the pulse of the city. Bengali is spoken by 250 million people. It follows Hindi as the most spoken Indian language. The city can clinch a share of the Bengali language information, communication and entertainment market. Media is a growing industry in Kolkata, but has not received the corporate focus and the nurturing of talent that it deserves.
While engineering colleges were edifying citizens of Bengaluru, Kolkata was left behind. However, today’s IT opportunity isn’t so much in business process outsourcing but in the world of social media, analytics and mobility. Kolkata’s long tradition with pure science and as a home of the Indian Statistical Institute may position itself favourably for getting a slice in the world of analytics and big data. There is of course much to do to close the gap between opportunity and success, but at least we can launch initiatives knowing that we will be starting with the right capabilities.
Finally, adaptability and inventiveness are part of Kolkata’s heritage — diverse people have long felt at home here, and the Bengali language, cuisine and music integrates many foreign influences. Kolkata has generally been welcoming and tolerant of religious and cultural differences. Tolerant cities correlate with livable cities and are a draw for creative immigrants. Industries such as design and fashion, advertising and PR depend on people who are less mainstream, free thinking and who need an affordable and eclectic environment to build their careers. Kolkata has in the past played and can in the future play the role that Brooklyn and Berkeley played in the US economy, not an active player when the economy was based on industrial production, but front-runners in the creative and collaborative world of today.
The Telegraph | 23-Jul-2016