Indian Economic Growth: Bengaluru – Leading Growth By A Distance

Bengaluru – Leading Growth By A Distance

by Puranika Narayana Bhatta - May 20, 2022 12:49 PM +05:30 IST
Bengaluru – Leading Growth By A DistanceBengaluru – leader in Gross District Income
  • Bengaluru’s population has grown by 70 per cent in the last two decades, while the country’s overall population has grown by about 28 per cent.

    Bengaluru leads the cities with a Gross District Income of Rs 6.8 lakhs. This is more than four times the national average per capita GDP.

I started the last essay writing about the trigger for the essay being the political jousting on which cities are driving economic growth in India. State-level data was examined to understand which states have been driving economic growth, since the pandemic began. The conclusion was that Uttar Pradesh and Karnataka were the largest contributors to economic growth in the last two years.

Karnataka has also become one of the few large states with a per capita Gross Domestic Product (GDP) in excess of Rs 3 lakh. We also examined a couple of hypotheses as to what may be behind the contribution of these states: reverse migration towards states like Uttar Pradesh and the Work-From-Home (WFH) effect of the pandemic.

One of the questions, we posed was whether these factors amplified, trends already at play. We delve a level deeper and examine data at the district and city level, to see what the data reveals.

Indian states have been reporting district-level GDP for several years now. However, the data is reported typically with a year or two’s lag. In order to use comparable data, where the latest year’s data is unavailable, we have used that particular state’s growth for estimating current year’s data for a given district. All data we will refer to will be at current prices.

To recap:

  • India’s GDP is estimated at ₹230 trillion for 2021-22

  • Per capita GDP is Rs 1.68 lakhs

  • India’s GDP compounded at 7.2 per cent over the last three financial years

Growth engine of large cities: Urbanisation has been an important force behind economic growth of most countries, and India has been no exception. Here we look at a few of the large cities of the country and the size of their economy:

  • Six cities make up 15.3 per cent of India’s economy.

  • Bengaluru has been growing at a significantly faster pace than the other cities over the last three years at double digits.

  • National Capital Territory (NCT) of Delhi is 4 per cent of India’s economy and has grown at the same rate as the country.

  • The three large cities of Maharashtra have been growing slower than the country.

  • While Hyderabad is growing faster than the country, it still lags the growth rate of Bengaluru by a distance.

The primarily services-driven economy of Bengaluru (83 per cent), has been able to grow rapidly in the “Work-From-Home” pandemic world and grow significantly faster than other cities.

Bengaluru – Leading Growth By A Distance

Notes on city-level data in this essay:

  1. Mumbai comprises both City and Suburban districts

  2. Thane comprises Thane and Palghar districts

  3. Hyderabad comprises both Hyderabad and Ranga Reddy districts

  4. Data for a few large cities in India, viz. Kolkata and Chennai have not been available for the last several years, and hence, these cities are not considered here.

While absolute growth is critical, one has to take population into account while comparing economies of different geographies. We will look at the Gross District Income per capita (GDI), for this purpose. In the previous essay, we had pointed out that Karnataka was the only large state with a Gross State Income per capita in excess of Rs 3 lakhs.

Bengaluru – leader in GDI

Bengaluru leads the cities with a GDI of Rs 6.8 lakhs. This is more than four times the national average per capita GDP. This one number explains the reason behind the large-scale migration to Bengaluru, from both within and outside the state. Bengaluru’s population has grown by 70 per cent in the last two decades, while the country’s overall population has grown by about 28 per cent.

Bengaluru – Leading Growth By A Distance

The other five cities in our analysis have between 2-2.7 times the country’s GDP per capita. Faster economic growth coupled with more disposable income (as seen in GDI) clearly differentiates Bengaluru amongst Indian cities.

One question which often crops up is, whether disposable income is concentrated in these cities/districts only.

Distribution of disposable income

Districts of three states with shared borders are considered – Maharashtra, Karnataka and Telangana.

Bengaluru – Leading Growth By A Distance
  • None of the districts in these three states has GDI less than Rs 1 lakh.

  • In Maharashtra, the division boundaries almost mirror the GDI pattern. Most of the districts in the Amaravati, Aurangabad and Nagpur divisions have GDI less than Rs 1.7 lakhs. Kolhapur and Nagpur outside the Mumbai-Pune belt have GDI more than Rs 2.5 lakh.

  • Outside of Hyderabad, the districts of Jayashankar Bhupalpally, Jagtial, Hanumakonda, Medak, Sangareddy (has a little overlap with Hyderabad Municipal Corporation), Yadadri Bhuvanagiri, and Wanaparthy have GDI greater than Rs 2.5 lakh.

  • Dakshina Kannada district in Karnataka, with Mangaluru as its headquarters, has GDI in excess of Rs 5.1 lakhs, more than three times the national number. Udupi, Chikkamagaluru and Shivamogga also have GDI more than Rs 2.5 lakh.

Analysis summary

- Pandemic has resulted in re-location of growth to certain cities, like Bengaluru, while the older engines of growth like Mumbai and Delhi are growing around the national trend. This is clearly seen in the GDDP and GDI data.

- It appears to be an underlying decadal trend which was accelerated by the pandemic, considering the population in cities like Bengaluru and the four times national average per capita economic size.

A Practitioner’s view

Vivek Sunder is the CEO of Cuemath, an ed-tech company focused on teaching mathematics. He has deep understanding of consumers and marketing in his career, across multiple countries. Key insights from him are:

- Location is a great proxy for affluence and income levels

- Affordability in a given area and amenities go hand in hand with affluence

- Data in hyperlocal areas like postal codes and school districts is used in the western world to determine customer ability and willingness to pay

He put a unique market penetration model in place for planning and tracking brand growth in hyperlocal areas, using Aaloka.

In summary, the emergence of Bengaluru’s economy with its size, pace of growth and disposable income is borne out by the numbers. Wonder if it is a coincidence that the biggest box office hits of 2022 are movies from Bengaluru and Hyderabad?!

In the first part of this blog, we looked at data at state level, to understand growth dynamics in the country.

The analysis for this blog has been done using Aaloka, a unique location-analytics platform, with external data benchmarks. Users can try out the platform for free here.

Also Read: Karnataka And Uttar Pradesh At The Forefront Of Growth – The Pandemic Effect

Puranika Narayana Bhatta is CEO of Latlong, a software products company. 

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