ECONOMIC CHANGE AND SPECIALIZATION IN INDIA'S CITIES

Abstract

Urban areas contribute to nearly two‐thirds of India's gross domestic product, but only constitute 31% of the country's population. In this paper, I address the following questions: What are the specializations of Indian cities and towns, and how have these changed over time; and what part of the specialization identified is a result of local advantages versus industry or national economic growth? Answers to these questions are basic to sustaining the competitiveness of India's cities. I used standard Census of India data at city level to compute location quotients for India's cities and towns, and examined changes in their economic base over time. Further, I performed shift‐share analyses for selected large cities to disaggregate their employment growth. On average, over 1991–2001, specialization in all sectors, with the exception of trade, decreased. I found evidence of persistence in the sectoral specialization of Indian cities during 1991–2001. Further, in all non‐agricultural economic sectors, cities in states know to be backward and lagging are specialized in most sectors. Based on location quotient analyses, I find that Mumbai is the financial capital of the country, Delhi is the seat of public administration, and Bengaluru specializes in transport, storage, and communications.