WHEN MIGRANTS FROM erstwhile Lahore were forced by the Partition to settle in Delhi and its suburbs after Independence, they were not very happy with their lot. They were leaving North India's commercial and cultural capital to settle in a relatively small city, whose only claim to fame was that it was India's political capital - a city that was full of bureaucrats and politicians.

Back then, none of them had an inkling that one day, their sons and daughters would be more than glad with the decision to set shop in Delhi. It may have taken a while for the scenario to change, but changed it has.

Ten years ago, for every one large company headquartered in Delhi, Mumbai had over two. Now, the ratio has shrunk to 3:2. Delhi and its suburbs (Gurgaon, Noida, Gazhiabad and Faridabad), which together comprise the National Capital Region (NCR), are among the largest growing business cities in India and home to some of the largest private sector companies in the country. And given the way the NCR is powering ahead, it is possible that in times to come, the ratio may be reversed completely. The notion that the shift is largely due to public sector enterprises, which for political reasons, tend to be headquartered in Delhi, is largely a myth. Even without PSUs, the number of corporate headquarters is swelling at a rapid pace in the NCR. Ten years ago, the NCR was home to 68 private sector ET500 companies; now it has 94 such companies. In the same period, the number of such companies in Mumbai has declined to 144 from 154 earlier.

Let's take a look at how things have changed. The NCR is now host to India's largest mobile phone operator (Airtel), largest real estate company (DLF), largest carmaker (Maruti Suzuki), largest two-wheeler maker (Hero Honda) and largest branded foods marketer (Nestle India). And we are not even counting unlisted companies like Coke, Pepsi and Nokia.

The fact is that except for companies in the banking and cement sectors, Mumbai can no longer claim undisputed leadership over any other industry. In the IT sector, it's facing stiff competition from Bangalore, while the gravity of the construction industry is gradually moving to Hyderabad. Interestingly, all these industries were pioneered in Mumbai.. (Read our story in city-sector mapping for more details)

Equally astonishing has been the rise of Bangalore as one of the preferred corporate destinations in India. A decade ago, it was just another tier-II city and compared with Ahmedabad, Vadodara and Coimbatore in terms of the number of corporate headquarters located there. In fact, Pune and Hyderabad housed twice as many ET500 companies. Cut back to '07, and India's Silicon Valley is the country's fourth largest commercial city ahead of Kolkata, Hyderabad and Pune and only a few notches below Chennai. And the way it is growing, it won't be surprising if it goes past Chennai as well.

Though the IT sector has played a big role in building Bangalore's reputation as a corporate city, it has used the label to attract companies from diverse background. Today, the city is home to India's largest auto component maker (Mico), largest gems and jewellery company (Rajesh Exports), largest alcoholic beverage group (UB Group), largest watch maker (Titan), largest garment exporter (Gokuldas), largest bakery products maker (Britannia) and biggest biotech company (Biocon), among others. And not to mention IT heavy weights like Infosys and Wipro.

So, what has led to the rise of Delhi and Bangalore as alternate hubs for corporate activity? Is it that there is a greater entrepreneurial activity in these cities, or have they been beneficiaries of companies shifting their bases? Or is it that Delhi or Bangalore- based businesses have grown faster?

Industry leaders believe that the decline of Kolkata was largely due to the Naxalite movement and labour unrest, which forced a number of companies to relocate from the city. On the other hand, they believe that Mumbai is being priced out of the game largely due to high real estate costs and local taxes such as octroi and entry tax. "High real estate prices and local taxes have made manufacturing unviable in Mumbai. Traditional industries like textiles, engineering and automotive have also moved out to alternative locations, including the NCR," says AK Taneja, executive director, Shriram Pistons & Rings, one of the country's leading manufacturers of engine components.

Spiralling real estate costs means that Mumbai is not exactly conducive for start-ups and entrepreneurs. "How can you expect start-ups to rent offices at Rs 500-600 per square feet and still be viable? Mumbai is good only for established businesses which already own real estate, or for those who can afford it, or have no option such as banks, brokerages or investment bankers," says Amitabh Mundhra, director, Simplex Infrastructure. Though Mr Mundhra sits in Mumbai, as some of Simplex largest clients are in that city, the company maintains a much bigger office in Kolkata and Delhi for cost reasons.

It is for the same reason that some of the most successful gate-crashers in ET500 in recent years - Infosys, Wipro, Bharti Airtel, GMR Infra, Nagarjuna Construction, IVRCL, Amtek Auto, DLF and the Jindals - are not from Mumbai.

The truth, though, is that in recent times, many of India Inc's biggest entrepreneurs have come from other cities. Delhi is full of first/second generation Punjabi entrepreneurs, many of whom migrated from Pakistan during the Partition and have now gained critical mass, thereby propelling them into ET500.

Similarly, Bangalore now boasts of some of India's most successful professional entrepreneurs, thanks to the IT boom over the past two decades. Hyderabad, on the other hand, is witnessing an entire generation of entrepreneurs, with surnames like Reddys & Rajus, who have used their agriculture wealth to invest in manufacturing, pharmaceuticals and services to build large businesses.

One important reason for this emergence of entrepreneurs from different parts of the country has been the spread of financial capitalism to the furthest corners of the country. "When I started 30 years ago, the formal credit channel was open to large corporates or certain business communities only. Now, any business with a cash flow and good business plan can raise loans," says SP Singh, who runs a logistics firm and tyre dealership in Delhi.

Some part of the change in this old order, especially in the case of the NCR, can also be attributed to the government. The NCR has witnessed huge government investment in infrastructure, roads, higher education, rail links and now, the metro. Since it's the national capital, Delhi has received disproportionate attention compared to other cities.

Similarly, government-owned companies have contributed to the rise of newcomers in their own unique manner. The emergence of NCR as an automotive hub is, to a great extent, due the government's decision to establish Maruti Suzuki in Gurgaon. Similarly, the ground for the rise of the IT industry in Bangalore was laid by government-owned companies and organisations such as the Indian Space Research Organisation, Hindustan Aeronautics and Bharat Electronics, among others, which employed a large number of engineers. Hyderabad's rise as the pharma capital of India was on the back of the city having been home to government-owned companies such as Indian Drugs & Pharmaceuticals and research laboratories like the Centre for Cellular and Molecular Biology.

The big question now is: will Mumbai be actually displaced from its No 1 position in the years to come? It is difficult to answer this question with a simple 'yes' or 'no'. If things continue the way they are, there's a good chance that the commercial capital of India may lose out in the next decade or so. That said, the city will continue to wield considerable clout so long as India's largest business families - the Tatas, Ambanis, Birlas and Mahindras among others - maintain their primacy. The writing on the wall seems to suggest that Mumbai can no longer take its lead for granted. Today, a start-up in Hyderabad, Bangalore or Gurgaon has as much a chance of hitting it big as any Mumbai-based business had a few decades ago.

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