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A quiet entrepreneurial revolution is unfolding in India’s smaller cities. Businesses in tier II and III towns are powering the economy, achieving success without venture capital. These entrepreneurs leverage local advantages and digital platforms. Their growth signifies a shift in economic power, creating jobs and inclusive opportunities across diverse geographies. This movement is reshaping India’s economic landscape.
There is a quiet entrepreneurial revolution happening in India, which is not talked about in the glossy business magazines or celebrated in India’s Silicon Valley conferences. It is happening in the factories of Surat, manufacturing units of Indore, and workshops of Ludhiana. The tier II and III businesses, also known as small-town businesses, or Bharat-led businesses, are silently turning the wheels of the Indian economy. And there’s more! They are doing it without the fancy venture capital fund or the ecosystem support that metro entrepreneurs get very easily.
And the numbers tell the story themselves. Close to 51% of the nation’s registered MSMEs are coming from tier II and III cities today. 63% of all e-commerce orders are now originating from smaller cities, with average spending of a tier II buyer at par with the metro city buyer, and so on. These numbers reflect that an entrepreneur sitting out of Agra or Ajmer is no less than a founder from Bengaluru. He may be different and unique in his own ways, but not less.
Metros and tier 1 cities have been traditionally economic hubs for many years; however, over the past decade or so, many enablers have helped tier II and III towns steal the limelight and become the growth engines of the Indian economy. Infrastructure development and internet connectivity have been the biggest enablers to bridge this distance between metros and tier II & III cities. This hygiene has also ensured good education and talent pool availability.
India is a young country, with almost 65% of the population under 35 years of age, and most of it is middle class coming from these tier II & III towns. This creates captive talent and opportunities for perfect matchmaking for entrepreneurs to set up their manufacturing units in these smaller towns. No wonder we are seeing increasing numbers of new manufacturing centers, logistics hubs, and IT parks in these smaller towns.
With the growing internet access and the emergence of online marketplaces, tier II & III entrepreneurs are not just levelling up with metros but also winning the numbers game. For small businesses that are just starting out, online marketplaces help in leveling the playing field by providing access to nationwide buyers, marketing options, catalogues/product showcases, and handholding throughout the whole digitalization process. Added to it, the government policies and focus on improving logistics, transportation, and overall infrastructure are also boosting the entrepreneurial spirit in these cities even more.
Tier II & III towns have some inherent advantages over the metros. Affordable real estate prices, lower wages, higher employee retention, and a local ecosystem make the business much more sustainable in these towns.
Not only external factors, but a lot of credit goes to the small-town entrepreneurs who are converting every challenge into an opportunity. The small-town entrepreneur operates with a different DNA, and it has its own advantages. The limited resources, restricted market reach, and finite credit access help tier II & III entrepreneurs to build with what they have, instead of relying on outside funding. The frugal innovation mindset, often termed as jugaad, leads to sustainable business models, which are either profitable much earlier or do not burn cash for many years to acquire customers. Similarly intimate understanding of local preferences, regional nuances, language needs, and cultural contexts serves as an added advantage to tier II / III entrepreneurs.
The impact of this change can be seen as increased contribution of these towns towards India’s GDP, significant job creation, improved quality of life for natives, and democratizing economic growth opportunities. This change has been taking away the much-needed economic growth load from metros and creating inclusive growth opportunities in diversified geographies. China started this journey many decades back and today has 27 cities contributing $100bn each to their GDP against 4 metros of India.
The path forward:
The old saying about Mumbai’s finance industry, Bangalore’s tech, and Delhi’s corporate HQs driving India’s growth is no longer true, with non-metro entrepreneurs catching up. Today, tier II entrepreneurs are building Bharat, with limited resources but unlimited determination. The next wave of Indian entrepreneurship coming from tier II cities is much bigger, more inclusive, and more transformative than anything we’ve seen before. For us, the question remains – How quickly can we support them, scale them, and celebrate them, because if they succeed, India succeeds too.
Online Coverage : ETRetail