Mumbai is India’s most costly city in terms of both living expenses and accommodation costs for expatriates, which is pushing organisations to consider low-cost areas like Hyderabad, Chennai and Pune for setting up operations.
According to Mercer’s 2022 Cost of Living survey, Mumbai at rank 127 is the most costly city in India, followed by New Delhi at 155, which also puts them in the top 40 most expensive cities in Asia.
Though Mumbai is a popular location for multinational corporations to establish operations, low-cost areas like Hyderabad, Chennai and Pune are also catching up due to the greater cost of living in Mumbai. Companies across the IT services, BFSI and pharmaceutical sectors are considering such low-cost cities to set up operations within India.
Among other cities, Chennai is ranked at 177 in terms of cost of living, Bengaluru at 178 and Hyderabad at 192, with Pune at 201 and Kolkata at 203 being the least expensive Indian cities in the ranking.
The survey highlights elements that contribute to daily costs. Kolkata has the lowest cost of daily necessities such as milk, breads, vegetables, etc, while Mumbai and New Delhi have the highest costs. In terms of energy, phone costs, etc, the cost of home utilities is highest in Mumbai and lowest in Chennai and Hyderabad. Watching a movie in Mumbai is most expensive, whereas in Hyderabad it is the cheapest. As petrol costs have increased in all Indian cities, the price of getting a new car and other maintenance costs have gone up in all cities, according to Mercer.
Rahul Sharma, India mobility leader, Mercer, said, “Global supply chains for necessities have been disrupted as a result of Covid-19-related volatility, which has been exacerbated worse by the conflict between Ukraine and Russia. As a result of this uncertainty, organisations have been forced to revaluate their global mobility initiatives.”
The survey found that Hyderabad had the cheapest housing of all the places examined in India when evaluating the country’s housing market. Among other Indian cities, Mumbai has some of the most costly rentals, followed by New Delhi and Bengaluru. The other Indian cities in the ranking — Chennai, Hyderabad, Pune and Kolkata — have accommodation costs that are over 50% lower than those of Mumbai.
However, as compared to other major cities in the Asia Pacific region, including Beijing, Shanghai and Manila, Indian cities including Mumbai and New Delhi have lower cost of living and expat accommodation, making it a cost-efficient destination for global MNCs to set up operations overseas.
The Cost of Living survey was conducted in March 2022. This year’s ranking compares the prices of more than 200 commodities including housing, transportation, food, clothing, household goods and entertainment in 227 cities spread across five continents. Also, this year Mercer added new items such as smartwatches, tablet computers and smartphones to the basket and non-relevant items such as music CDs and video movie rentals were removed.
Meanwhile, Indian multinationals too are increasingly opening satellite offices in cities other than in the main metros in the post-pandemic times, though they call it more of a post-pandemic phenomenon, as people now prefer working closer or in their hometowns rather than shifting to bigger cities, and do not make a direct link to cost of living. Nachiket Deshpande, chief operating officer, L&T Infotech (LTI) told FE that the company’s approach has shifted to taking the work to people rather than bringing people to work in the post-pandemic times. LTI has expanded operations recently to cities like Coimbatore, Hyderabad and Kolkata. “Our expansion across multiple cities is part of our global plan and we intend to open a few other locations soon,” he said.
Another L&T company, L&T Technology Services (LTTS), finds that the hybrid model of working ensures minimum disruption to its innovation process. Abhishek Sinha, chief operating officer, LTTS, said that in several roles the company has provided the flexibility to employees to work from any of the current LTTS locations in India — Vadodara, Bengaluru, Chennai, Mumbai, Mysore and Hyderabad, which gives it the opportunity to leverage the sizeable engineering talent pool available in these cities. “This approach benefits the local talent as well, as they can be close to their families. Also, we are seeing that talent from metros wants to shift to other cities, to have an evolved lifestyle away from the busy city life,” he said.