The Rise of India’s Tier 2 Cities: New Investment Hotspots for Global Businesses

Introduction

While Mumbai, Delhi and Bengaluru have long dominated India’s investment narrative, the next wave of economic growth is being powered by Tier 2 cities. These emerging hubs offer cost-effective operations, pro-business state policies and untapped talent pools, making them ideal destinations for international companies seeking India market entry support.

At the International Advisory Council (IAC), we help investors spot high-growth regions and craft tailored entry strategies, especially in cities that are often overlooked but full of potential.

---

What Are Tier 2 Cities?

Tier 2 cities in India are mid-sized urban centers with rapidly developing infrastructure, strong educational institutions and rising income levels. These include:

• Ahmedabad, Surat, Indore, Nagpur, Coimbatore
  
• Chandigarh, Lucknow, Bhubaneswar, Jaipur and Visakhapatnam
  

Once considered secondary markets, these cities are now front and center in India’s economic transformation.

---

Why Global Businesses Are Choosing Tier 2 Cities

1. Lower Operational Costs

Real estate, logistics and manpower costs in Tier 2 cities can be 30–40% lower than metro areas ideal for business setup in India.

2. Growing Infrastructure

Under schemes like Smart Cities Mission, these cities are developing:

• Integrated industrial townships
  
• Modern airports and logistics parks
  
• Smart transport and urban governance systems
  

This makes cross-border business promotion and last-mile connectivity more efficient.

3. Skilled Workforce and Academic Institutions

Tier 2 cities house renowned engineering and management colleges, fueling a young, trainable workforce that appeals to foreign employers and B2B service companies.

---

Top Sectors Thriving in Tier 2 Cities

• Manufacturing and Auto Components: Pune, Coimbatore, Vadodara
  
• IT and SaaS: Kochi, Indore, Chandigarh
  
• E-commerce and Warehousing: Jaipur, Lucknow, Bhubaneswar
  
• Agri-tech and Food Processing: Nagpur, Ludhiana, Raipur
  
• Tourism and Hospitality: Udaipur, Mysuru, Amritsar
  

Each region also receives sector-focused investment campaigns from its state government and IPA.

---

Case Study: European BPO Expands to Indore

A mid-sized European BPO firm worked with IAC to expand its presence in India. Instead of Bangalore, they selected Indore due to:

• 40% lower rental and salary costs
  
• Proximity to client cities like Mumbai and Delhi
  
• Fast digital infrastructure and smart city support
  

IAC supported the entire process from site visits to in-country representation India resulting in a lean, profitable operation that now supports four EU languages.

---

IAC’s Support in Tier 2 Market Entry

We assist companies by:

• Mapping ideal Tier 2 cities based on sector and logistics
  
• Coordinating with state-level IPAs and EDBs
  
• Identifying potential partners for B2B matchmaking India
  
• Providing on-ground support through our India investment facilitation services
  
• Managing PR for international companies entering smaller cities
  

We also advise foreign IPAs on promoting Tier 2 Indian cities as trade partners or sourcing hubs.

---

Emerging Investment Hotspots to Watch

• Surat: Fastest-growing city by GDP; thriving in textiles and diamonds
  
• Lucknow: Defence and electronics hub; part of UP’s defence corridor
  
• Coimbatore: EV component manufacturing and technical textiles
  
• Vizag: Port-led development and fintech ecosystem
  
• Chandigarh: IT and SaaS, with high living standards for foreign expats
  

---

Conclusion

India’s Tier 2 cities represent the future of inclusive, decentralised growth. They offer access without congestion, talent without churn and value without compromise. For global businesses looking to scale with speed and sustainability, these cities are the new frontier.

At IAC, we help you make confident, data-driven decisions about where and how to invest in India’s next-generation markets.