Growth of tier-2 Cities in India

Tier-2 and Tier-3 cities, are becoming new centres of economic activity, backed by rise in digital transactions and increasing number of startup registrations.

Challenges

• Tier-2 and Tier-3 cities had the maximum population of poor and the middle-class.
• Lack of infrastructure like road, connectivity, etc.
• Lack of residential structure.
• Poor planning.
• Lack communication infrastructure.

Significance

• Thousands of prospective new middle class homebuyers and investors see these cities as a substitute to polluted, overcrowded metros.
• These cities are fast emerging as real estate markets where a robust housing segment continues to complement the overall infrastructure growth.
• Most of these cities are gradually transforming to be the economic powerhouses while contributing to the state and national GDP.
• The upcoming large-scale developments such as Delhi-Mumbai Industrial Corridor (DMIC), Metro Neo and Metro Lite, will bolster connectivity and put Tier 2 and Tier 3 cities such as Sonipat, Jaipur, Dehradun, etc. on the infrastructure map.
• On the technological front, the rollout of 5G technology augurs well for the IT/ITes industry in Tier 2 and Tier 3 cities.
• Besides serving as a consumer market, the cities such as Jaipur, Indore, Lucknow have emerged as an education hub, thereby generating skilled human capital employed in various firms.
• It has led to the rise of the emergence of the ‘hub and spoke’ and ‘edge’ model wherein Tier 1 cities serve as hubs while Tier 2 and 3 towns form the spoke network, and the ‘edge’ implies the work that can be done remotely.

A combination of the rising middle class, a shift in consumption patterns and technological innovation augur well for Tier 2 and Tier 3 cities to emerge as growth engines of the Indian economy.