Flying high: Despite investment in infrastructure, Delhi has been unable to attract big services companies primarily due to high real estate prices

Among the 32 states of the Union of India, Delhi stands out like a sore thumb. With an area of 1,483 sq km, it is smaller than cities such as Kolkata, but its population of 14 million is bigger than Goa's. Its state domestic product of Rs 56,253 crore (2002-03) is only the eleventh-biggest, but per capita income at Rs 39,620 is the highest. The oddities don't end there. Technically Delhi is a state, but in practice it is still an overgrown city, and until the controversial Delhi Statehood Bill, 2002, is passed by Parliament (the central Cabinet cleared it recently, but the local government, which is controlled by the Congress party, opposed the Bill because it gives overriding powers to the Governor) it will remain so. Laments Delhi's Chief Minister Sheila Dikshit: "It is a government that is working with its hands tied behind its back."

The city-state's biggest problem is that it only has limited powers and resources. For instance, there is an array of agencies-the Municipal Corporation of Delhi (MCD), the New Delhi Municipal Corporation (NDMC), the Delhi Development Authority (DDA), the Cantonment Board, the Union Government and National Capital Territory's (Delhi) legislative assembly-all with distinct powers and authorities. The DDA, for example, has all powers relating to the sale, transfer, and development of land in the Capital, with the state government having virtually no say in the matter. Similarly, the MCD and the NDMC are outside the purview of the local government. So much so that the state cannot even open a new bus stop without the DDA's permission.

FACT SHEET

AREA: 1,483 sq km POPULATION: 14.1 million STATE DOMESTIC PRODUCT: Rs 56,253 crore PER CAPITA INCOME: Rs 38,864 ROADS: 28,508 km POWER: 800 mw MAJOR INDUSTRIES: Plastic and PVC goods, chemicals, soft drinks, machine tools

The multiplicity of authorities has meant constant bickering between the state government and the Lieutenant Governor, who is the Centre's representative. Delhi's Master Plan hangs fire because of differences between the two governments, and overlapping of powers among agencies has stymied initiative and added to red tape. Getting the six different approvals needed for setting up something as simple as a shopping mall can take between six and 18 months. Says H.S. Kohli, Director (Operations), Ebony Retail Holdings: "A single-window clearance is not yet a reality."

DDA's complete monopoly and constraints of space have kept retail prices in Delhi prohibitively high, making it the single-biggest obstacle in attracting greater investment into the state. For example, prices of A-category commercial real estate in Delhi are five times Gurgaon and Greater Noida's average of Rs 10,000 per sq ft. "So why shouldn't developers move to Gurgaon (or Noida) when they can get equally good customers there?" asks Shravan Gupta, Executive Director, MGF Developers.

To make things worse, half-a-million immigrants pour into the city every year. Delhi has surplus power, but outages are routine, thanks to distribution losses. The recent privatisation of power distribution, however, should improve the situation in a few years from now. Similarly, water continues to be an issue because the supply of 665 million gallons per day (MGD) is vastly short of the 800 MGD demand. That too should change once the 140-mgd water treatment plant in north-east Delhi comes into operation by the end of this year.

Snazzy Suburbia: Delhi's loss is Gurgaon's gain. World-class, malls and modern apartment complexes have transformed the once-sleepy agricultural town

But it was the Supreme Court directive of December 2000, pushing some 39,000 polluting units out of Delhi and laying waste a number of industrial clusters in Naraina, Mayapuri, and Wazirabad, that put a question mark on further industrialisation of the state. "Expensive land and stringent pollution norms make Delhi unsuitable for any industrial activity," points out Ravi Sinha, former CEO, SRF and former head of the Confederation of Indian Industry's Delhi unit. No wonder, the capital received just Rs 300 crore in private investment over the last three years.

A poor reflection of its potential.

Services Spin

So what is the way out? Delhi's salvation may not be in manufacturing industries at all. Rather, services could be its new growth engine. People like Sinha believe that Delhi must reinvent itself as a services hub if it is to stay in the reckoning of Gurgaon and Noida. That means it should become the centre of healthcare, retail, tourism, and education for the surrounding areas, as well as the nucleus of trade, banking insurance, and commerce. There could be industries too, but these would be high-tech and knowledge-based such as it and biotech.

As far as healthcare is concerned, Delhi has some of the finest medical teaching and training institutes such as the All India Institute of Medical Sciences (AIIMS), top-notch hospitals, and accredited laboratories. Besides, its international air connectivity and strong hospitality industry make the city an attractive medical destination for patients from neighbouring countries.

But then turning Delhi into a high-tech hub has its own set of problems. Because of its population pressure and the high cost of land, such development has to be combined with a pragmatic relocation policy, outside Delhi and into the National Capital Region (NCR) with connectivity and infrastructure assured. "The NCR region needs to develop as a counter-magnet through specific policies that improve connectivity and infrastructure," says Dikshit.

Once again, though, her plans hinge on support from the central government. The development of 30,242 sq km of NCR would need chunks of land from Haryana, up, and Rajasthan. That's something only the Central government can help Delhi acquire. The irony, however, is that a successful NCR (and its satellite townships) may actually end up eclipsing the city-state-at least in terms of business.