A tale of tier 2 cities
This report is from this week’s CNBC’s “Inside India” newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe here.
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The big story
India’s economic map is being redrawn.
While the nation’s mega cities — or metropolises as they are known — like Bengaluru, Hyderabad, Chennai, New Delhi and Mumbai continue to grow, a subtle, yet pronounced wave of opportunity has been sweeping through its tier 2 and 3 cities.
These cities — which include Chandigarh, Coimbatore, Kochi and Jaipur — offer advantages ranging from lower operational costs to a more laidback lifestyle, decent education opportunities and a reserve of untapped skilled and semi-skilled employees.
Several companies are capitalizing on these opportunities.
Take for example Trident, a textiles company producing linens, rugs, bedspreads and yarns for consumers in both India and abroad. The company is headquartered in Ludhiana, an industrial city that is around 100 kilometers away from Chandigarh, the capital of the state of Punjab.
Multi-national companies wanting a presence in India have also been vying for space outside the major metros. For instance, automaker Kia India set up its manufacturing facility in the district of Anantapur, which is around 215 kilometers away from Bengaluru.
India’s tier 2 and 3 cities are also becoming hotspots for the set up of Global Capability Centers (GCC), which look after a slew of business functions for a parent organization.
The Asian powerhouse is home to around 1,800 of such centers — giving it a global market share of over 50%, data from jobs and talent platform foundit shows. One in five GCCs established their base in a tier 2 city in the first half of 2023 so as to reach out to new talent markets, according to the data.
Pune, a city in the state of Maharashtra is a hub for GCCs specializing in IT, automotives and manufacturing. Meanwhile, Ahmedabad, a city in Gujarat is a key destination for companies in banking and financial services given its proximity to the Gujarat International Finance Tec-City.
Other cities that have been seeing interest among GCCs include Chandigarh, Bhubaneshwar, Jaipur, Lucknow and Visakhapatnam, thanks to improved air connectivity, the set up of new-age private universities and reduced costs.
“These cities have been sprouting up organically as the population grows, and space gets limited,” Shumita Deveshwar, chief India economist at TS Lombard, told CNBC’s Inside India.
Close to 60% of India’s GDP was from its urban pockets, data from government agency NITI Aayog indicates. As more people move to cities, 73% of the nation’s population growth is expected to be in urban areas by 2036, according to the agency, with workers commanding a wage premium of 122% over those in the rural parts of the country.
There is no official…
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