in Tier 2 cities in India. This means that even the isolated corners along with NER are experiencing newly lit entrepreneurial intentions.
The current development of the internet along with the appearance of the internet among youths is driving talent and innovation towards non-metro cities in India. It is important to know that about 33% of the winners from the National Startup Awards were coming from Tier 2 and Tier 3 cities. To support this continuous growth, 26 Indian States have started to implement other operational startup policies.
Because of the rapid rate of the tech revolution, and access to a quick and also cheap internet, entrepreneurs have access to many sources of information, ideas, and knowledge. This has also given a chance to startups in small cities, and the remote and hybrid work has encouraged startups to grow in these places.
People who are living in low-tiered cities have become more exposed to the trends that promote consumerism and materialism, causing the expanding market where people are more enthusiastic about spending.
The Indian cities are complex and diverse, and the process of categorizing them requires various factors such as population, economic activity, infrastructure, and administrative importance.
But there’s not a single “official” classification system and various companies and organizations are using different criteria to sort these cities into lists.
Tier One cities - they play the role of major hubs for business, politics, and culture. These have large populations, a strong infrastructure, powerful economic foundations along a high standard of living based on a well-established healthcare system.
Tier 2 cities in India and Tier 3 - cities in recent years have experienced substantial growth in economic activities like employment, investment, trade, research, and also education.
The remaining Tiers are typically located in rural areas or remorse areas and usually have a stronger connection to other parts of the country that can offer continuous development.
The continuous development of Tier 2 cities in India can be attributed to various factors that are pushing businesses and their people out of Tier one cities and toward smaller ones.
Let’s review some of the push factors that contribute to this shift:
- Competition and saturation - because Tier one cities are becoming more crowded, the employment opportunities along with business growth are becoming a saturated path and as a result, businesses want to move towards smaller places that can offer a better quality of life and plenty of opportunities.
- A higher cost of living - Tier one cities are usually connected to a high cost of living which can include expensive house rents, transportation, or just daily expenses. This situation can push people and also businesses to search for affordable options in Tier 2 cities.
- A neglected environment - often Tier-one cities are facing issues and challenges that are related to environmental sustainability such as water pollution, waste management issues, air pollution, and others.
But these consequences from the factors that are managing to push businesses and people out of Tier one cities can have a positive impact on Tier 2 cities In India because they can offer some benefits. Let’s talk about some of these benefits and advantages:
- Development of the infrastructure - Tier 2 cities are now facing significant improvements in infrastructure including transportation networks, better connectivity, and modernized utilities.
- A more educated workforce - Tier 2 cities in India have become more attractive recently because of the availability of people who are skilled and educated in different industries and can work with various resources.
- A digital world that is in continuous development - recently, in India Tier 2 cities people and businesses are investing in the digital infrastructure to improve it and benefit from a high-speed internet connection, digital payment systems, and also e-governance activities that are making these cities attractive for every company and organization.
The key sectors that are experiencing a development in innovation are diverse with several industries that benefit from the combination of a digital infrastructure with a growing consumer base and the entrepreneurial spirit. Let’s review some of the major sectors that are contributing to this shift:
Technology and IT services
India Tier 2 cities attract more and more IT services and tech-based innovations because of their lower operational cost and a growing pool of skilled people. Many IT companies are transferring from traditional tech hubs such as Bangalore and Hyderabad towards Tier 2 cities such as Coimbatore, Indore, or Bhubaneswar.
And because of the rise of remote work in the post-pandemic period, companies are now embracing a flexible work environment. So, co-working spaces in Tier 2 cities in India are successful because they provide a cost-effective option for small businesses and startups.
Healthcare and Telemedicine
The healthcare sector in Tier 2 cities is facing significant transformations because of the technology and innovative healthcare delivery models. Because smaller cities and rural areas have limited access to healthcare facilities, telemedicine is trying to close this gap. Healthcare startups are offering remote consultations, diagnostics, and medicine delivery to make sure that healthcare is accessible to everyone.
Several startups in the healthcare sector are now developing in Tier 2 cities and can provide AI-powered diagnostics along with health monitoring devices and e-pharmacy services. For example, Dozee is a company that uses technology to monitor a patient's vitals remotely and can be useful for those particular areas that have limited medical resources.
E-commerce and retail
With the increasing disposable incomes, India Tier 2 cities are becoming an attractive market for online retail platforms such as Amazon, Flipkart, and Myntra. These platforms are trying to innovate a way to serve consumers in smaller cities through localized marketing strategies, language support, and with region-specific offerings.
Some companies are innovating in logistics and last-mile delivery to be able to provide also for Tier 2 cities and rural areas. For example, Delhivery and Ecom Express are using technology to optimize their delivery routes and also expand their reach in those regions.
Also, local stores and retail businesses are now integrating digital payment systems, such as UPI to embrace online-to-offline models and to reach a wider audience.
Education and EdTech
There exists a demand for a quality education that is growing in India's Tier 2 cities and EdTech platforms and companies like Unacademy or Vedantu are expanding their services to these cities. They provide live classes, recorded lessons, and personalized learning paths for those students who are training for competitive exams and competitions.
Also, there is an urgent need for training in developing technologies such as Artificial Intelligence, machine learning, and data science. EdTech platforms can offer these skills through online courses and companies like UpGrad and Simplilearn are offering certification programs to help students and professionals remain competitive and always up to date with trends.
Tourism and hospitality
India Tier 2 cities such as Udaipur, Varanasi, and Mysore are now experiencing a rise in innovative tourism models on ecotourism and experience-based tourism which can attract niche travelers. Many companies are offering tailored experiences, starting from local culinary tours to heritage walks.
Also, the expansion of platforms like OYO and MakeMyTrip into lower-tier cities in India is designed to make the process easier for travelers to find affordable and quality accommodations. These kinds of platforms are managing to innovate with customer-friendly apps, dynamic pricing, and also AI-powered recommendations.
Innovation across these Key Sectors can reshape the economic view of lower-tier cities in India. With the rapid development of technology, local talent, and also government support, these cities are becoming hubs of growth and creating new opportunities for businesses to improve the quality of people’s lives.
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