The Indian economic growth is seeing a tectonic shift in terms of geographical contribution. The shift of growth is from the metro cities towards Tier 2 and Tier 3 cities and is seeing one of the biggest structural transformations underway. While till some time back it was only appearing through some traces of scattered data points and discussions, however, these traces have started building into trends now.
The movement of this growth to Tier 2 and Tier 3 cities is due to the fact that it is where India’s next wave of consumers, workers, and affordable business ecosystems are emerging. While the rising aspiration of these cities fuelled with increasing dispensable income is said to be at the root of this shift; the corona period seems to have acted as a catalyst for this shift as it triggered work from home for professionals with enhanced internet penetration in the countryside. Some of the interesting facts showing up as trends are here as below:
- As of mid-2025, Tier 2 and Tier 3 cities together account for nearly 40%-45% of India’s GDP, a proportion that’s steadily growing (Media India group).
- More than 53% of India’s 297 million urban consumers (aged 15–55) now reside in Tier 2 and 3 towns (Mint).
- Tier 2 and 3 cities report a 37% CAGR (2019–2022) in online commerce—much higher than the 20% CAGR in urban markets (Mint). In Tier 2 and 3, 63% of e-commerce orders (FMCG) originate from these markets (ET).
- 51% of India’s 63 million registered MSMEs are based in Tier 2 and 3 cities. Growth in business activity there rose 35%, while 44% of investors shifted beyond metro markets (Mint). Roughly more than 50% of startups registered with the DPIIT are located in Tier 2 and 3 towns.
We are experiencing this emergence 1st hand. E.g. For a leading supply chain company in India, Genex Logistics, in last few years, 55% of network (of 76 Warehouses, Fulfilments centers and Plant operations) is supporting the Tier 2 and Tier 3 cities logistics operations. This trend is gaining speed in recent times.
As such, Tier 2 and Tier 3 cities in India are no longer peripheral, they’ve become central growth engines. With rising incomes, expanding job markets, booming e-commerce, nimble MSMEs, fresh startups, and a rapidly evolving infrastructure ecosystem, these cities are powering the next wave of India’s economic story. Are you planning to be part of this emerging shift and participate early while the market is still expanding or want to observe the trend from the outside. Comment here!
