Delhi is a rarity on the Indian landscape: a symbol of urban progress rather than urban decay. And for almost a decade, Sheila Dikshit has presided over the nation’s Capital as its chief minister. Dikshit, nearing the end of an unprecedented second term, has helped guide an array of economic and political changes. Under her watch, the first phase of the Delhi Metro was completed on budget and on time—a feat heralded as belying the stereotype of the Indian government’s inefficiency. The second phase is on track to be finished in time for the Commonwealth Games, scheduled to be held in the city in 2010.

CM Sheila Dikshit says Delhi has improved in many ways, but there are still miles to go

Yet, Dikshit would be among the first to acknowledge that progress has not come fast enough or without snags. Delhi is straining under the weight of a vast and growing population. More than 13 million people live there, and half a million more move in every year. Decision-making can be excruciatingly slow, especially since her administration shares authority in the city with elected municipal leaders and a lieutenant-governor appointed by India’s President.

Shirish Sankhe, a director in McKinsey’s Delhi office, met with Dikshit in her residence and discussed the challenges of urban development in India, as well as some of her successes.

Have India’s recent economic gains surprised you?

I think we stopped being surprised a while back. There is a lot of confidence throughout India regarding Prime Minister Manmohan Singh’s economic capabilities, his understanding of the Indian economy, and how you integrate the Indian economy into the world economy. It also helps that the government is growth-oriented and is moving towards a more open economy. Many current policymakers understand economics and have tried to take the economy out of the shackles where everything had to be cleared by the government before anything could take place.

People are feeling very comfortable with the growth. It’s amazing how the buoyancy comes in. You see it in art, you see it in culture, in our theatre, in our films. And among the youth there is the recognition: I am proud of my country.

What can slow down India’s growth?

We have people with outstanding and very innovative minds. This country is not short of wealth. This country is not short of skills. This country is not short of brains. What we lack, and I think what we always have lacked in this country, is effective management in the government.

I can give you a very interesting example. Government schools in Delhi were performing very badly. The pass percentage on standardized tests was 35-37%. We looked into it and found that the government spent Rs900 per child per month, while non-government schools, which were performing better, were spending a maximum of Rs700-800 per child. We brought the teachers together and asked, “Obviously, you are the best paid, so why are you not delivering? What do we need to do to motivate you?" And when the teachers got motivated, children performed better. Today, the pass percentage has risen to 82%, half a percentage point more than non-government schools.

I can give you another example concerning the problem of exporting. There were 17 different forms that had to be filled out to export something. So we had a talk with the relevant authorities and said, “Please, let’s reduce this." Other countries have two or three forms, and it’s done with. So they set up this committee, and when they came back with a solution, instead of 17 forms, 25 forms had to be filled out. So you see it’s the mindset, especially in administration, that needs to be changed. We are addressing it, but I don’t think we are addressing it seriously enough.

There is also a feeling of mistrust between government and non-government sectors. The bureaucrat always presumes that the person coming to him for help must be a crook, that he wants me to do something against the rules. But that poor person doesn’t know the rules. That fellow sitting across the table has come in for help or information, and he’s just wished away or told 100 reasons why he cannot be given what he wants.

The Right to Information Act is helping by making things more transparent. When we started it in Delhi, we found a lot of scepticism about it. But now the people are starting to get used to that power. Also, I started an unusual programme in Delhi called Bhagidari, which focuses on governance through partnership and received a best-practice award from the United Nations. Citizens’ groups and the government interact with each other every week or every month in little groups.

Is social disparity becoming a bigger problem?

Yes, social disparity is there, perhaps not as much in the cities, which attract migration, as in the divide felt between the agrarian areas and the cities. Growth seems to have ignited in services and industry, but in the beginning, that growth was not paying much attention to agriculture. That aberration has now been corrected, and it will come naturally.

How has Delhi changed during your two terms in office?

If you look at the physical achievements, the infrastructure is much better, the power is much better, water is much better and transport is better because of the Metro, although not terribly so. I would say it needs another two to three years to put it right. When I look at human development, I think Delhi has changed from a cynical city to a city of hope. And it attracts not just people who seek jobs but also culture now.

That infrastructure—the dozens and dozens and dozens of flyovers that have come up, the underpasses that have come up—has attracted a lot of labour from outside. Meanwhile, those who were living here were not terribly interested in doing manual labour. So the labour came in, and those who are local have become better educated and are looking for jobs in the service sector. A bit more economic growth has meant more migration, and more migration has meant that we almost keep standing where we are.

Has infrastructure been able to keep pace with growth in the city?

It is keeping pace now, but we should be ahead. The fact that we have been able to cater to the half million people coming into the city each year in everything except housing is the good point. The bad point is that it’s slow. For me, it’s not fast enough. With the technologies we have today, we should be able to build infrastructure much faster.

Archaic systems and a great multiplicity of authorities in Delhi are slowing us down. You have the federal government. You have my government. You have the municipality. We are a state government without, for instance, the power of owning land. It’s a great problem. We have a lieutenant-governor here representing the Government of India, which no other state has. We work with our hands tied. It’s very unique.

Yet Delhi was able to complete the first phase of its subway on time and on budget. How do you explain that?

First, there’s Sreedharan (E. Sreedharan, managing director, Delhi Metro Rail Corp. Ltd). He’s a good manager, a good conceptualizer, and a good implementer. You can have, and you will probably have, lots and lots of Sreedharans in India but they are unable to get the kind of freedom he was given to operate.

We gave him that space. For example, nothing that concerned the Metro was negotiable in a court of law, so it could not get stuck. Take land, for instance. Subways need land for stations, and you have to shift a lot of buildings, a lot of shops, and a lot of people. And when the Metro said, “We need land," and we said, “All right, this land you will get." And whatever else was reasonably asked for by them—for instance, not to pay excise, not to pay VAT, et cetera—we gave them that because it was important to complete this project. Now I can say to my other departments, if Mr Sreedharan can do it, and if I promise I won’t interfere, you do it. It was important to make the Metro project a role model, so that others would feel that they could get projects done, too.

Housing, especially low-income housing, has been less successful. Why?

Part of the problem with housing stems from the strict land laws that we have, and the very strict, archaic usage of land. Go to any European country, and you’ll find a road and buildings right against the pavement. We say, if you have a plotted piece of land, set your building back 30ft or 20ft or whatever. These are luxuries which we cannot afford any more—the FSI law, the FAR law, and all that. But what we are doing now, and what I hope to be able to complete before we go into the next election, is to bring in more housing for the poor. This means building 200,000-plus units for the poorer people. This could be a two-room tenement with a washroom for Rs2 lakh that would be subsidized. We will divide these tenements into communities that have their own little shopping area, a school, and little gardens in between. We’ll have to change some laws, and we are working on that. I’m also very keen on what they call holding areas, which are kind of like dormitories, for migrant workers. The labour that comes in here could stay in those holding areas and go back to their villages if they want to. They do not own the place, but they do have the right to live there for a certain rent that can get transferred from mother to child and child to child. Unfortunately, the Indian political mindset is still not able to accept this. It’s still not sinking in, but I want it to sink in and will keep on singing until my voice is heard.

How can other Indian cities follow Delhi’s example?

They should be made into city-states, and we should start with five cities: Kolkata, Mumbai, Chennai, and so on. I am sure politically no one would agree with this, but I think administratively it would be good for the country’s development. Create city-states and give them the power to undertake development. They should not be under the state governments but rather under their own chief minister or chief administrator or whatever you want to call the position. They would collect their own revenues, maybe sharing a percentage with the other states. You have to develop your cities, especially if you’re envisaging that in the next 20 years 55-60% of India’s population will be urban. You just can’t do it with the same old administration where you’re dependent on various constituents for every penny.

Reprinted with permission, ©1992-2007 McKinsey & Co. The article was originally published in The McKinsey Quarterly and can be found on its website,