Why the Tier 2 Cities in India are Emerging as Business Hubs

? Currently I am mentoring a few Start-ups in North East Region (NER), India, the responsibility offered by IIM Calcutta Innovation Park, under the North East Entrepreneurship Development Programme. Out of these a few Start-ups only one is based out in Guwahati, a Tier II city and the rest are in small cities and towns like Silchar (Assam), Tezpur (Assam), Imphal (Manipur), Itanagar (Arunachal Pradesh) and Tura (Meghalaya). These Start-ups are initiated by the youths from NER who have strong academic backgrounds like PhD, master’s degree and BE/ B Tech and the Start-ups are in various stages like MVP, Ideation and Prototype.

????? These are in line with the expert’s findings that more Tier 2 cities in India are emerging as business hubs, with Tier 1 markets reaching a point of maturity. We are agreeable to the fact that the non-metro cities are also showing a similar trend these days. Of course, this is a positive indication of balanced growth and development.

??????? There may be several factors that are driving the emergence of Tier 2 cities and even the smaller cities as business hubs with over?49% of the recognized startups based out at Tier II and III cities. This shows India’s remote corners including the NER are shining brightly with newly lit entrepreneurial spirits.?

?????????? Current Tech revolution?and internet penetration our youths are propelling talent and innovation forward in India’s non-metro cities. It is stimulating to know that about?33% of 2022’s National Startup Awards’ winners?belonged to Tier II and Tier III cities.?26 Indian States?have notified and operational startup policies which supplement this growth.

???????? Also the skyrocketing costs of real estate and labour in metro cities and exorbitant rent demands have been pushing entrepreneurs towards?Tier II and Tier III cities.? More than 51 small cities-based startups have already gone public in India.

?????????? Skilled and talented manpower is no longer an imperium of metro cities. The COVID-19 pandemic in its wake brought about a redistribution of skillset, with many reverse migrating to their cities.?As per an estimate around 4 Lakh migrated workers returned to NER during the Pandemic time sliding back the region to poverty. Many of them who returned have appropriate skillset, exposure backed with local ecosystem of NER and can become entrepreneurs. With the motivation and support a few have already opted for entrepreneurial career recovering rekindling the hopes of transformation. With their exposure to the outer world and stirred by the successes stories these returnees have kicked into a virtuous cycle of building their own deep tech-driven business models in their cities. Many focus on finding solutions contextualized to local problems. Case of Sanjoy Deka whom I interviewed on 19.10.2021 is a glaring example. Sanjoy who was working in a Travel Agency lost his job due to pandemic. Returning to his native town Mongaldoi (Assam) with the assistance under the scheme PMEGP of the Ministry of MSME, Government of India, through SBI set up an enterprise which makes designed doors, window, marble and glass cutting using CNC Router machine, first of its kind in the entire district.

??????? Due to the accelerated pace of the smartphone, tech revolution, and access to quick and cheap internet entrepreneurial minds can now access varied sources of information, ideas, knowledge, and resources globally. This has given push to the startups in small cities too. Even the remote and hybrid work models have stimulated startup growth in these places.

??????? People in low-tiered cities are gradually becoming exposed to consumerism and materialism trends, this inter-alia have expanded market where people are eager to spend.

???????? The start-ups set up in lower tier cities are nearer to the sources of raw materials which is boon for small units. This is more pertinent to NER, the region blessed with vast untapped natural resources. The people living in NER are rich with traditional knowledge that are convertible to economic benefits trough fine tuning. ???

???????? Initiatives like Digital India Startup Hub and Digital India Investment Fund have been improving funding access to compensate for limited venture capital interest, although its effect is minimal in NER.? Besides the entrepreneurs themselves, the startup ecosystem consists of various stakeholders, including incubators and accelerators, investors, service providers, educational and research institutions, and big companies. This section describes how the Indian startup ecosystem has evolved, and where and what kind of support has become available to startups. Yet these areas need to be strengthened, especially in NER.

??????????? According to the Department for Promotion of Industry and Internal Trade (DPIIT), Government of India over 38,250 startups were recognized in Tier II and Tier III cities as of June 30, 2022, out of a total of 72,993 recognized startups in India. These are all positive signs promoting “Reverse Migration” India urgently need to practice. ?

Dr. Sukamal Deb ([email protected])