Business

India’s Tier-3 And Tier-4 Cities Emerging as the Next SME Hubs

sme hubs india

Over the past decade, the Small & Medium Enterprises sector in India gained substantial growth owing to rapid development, technological disruption, and greater awareness around this space. In addition, the vast scope for growth present within this industry has also encouraged many budding entrepreneurs to explore possibilities within multifarious industries, and build successful businesses.

According to a report published by The Confederation of Indian Industry (CII), the MSME sector is the backbone of India’s national economic structure, and is constantly strengthening the Indian economy in the face of various global economic meltdowns and adversities. Comprised of more than 51.1 million units throughout the country, the MSME sector contributes up to 7 per cent of the manufacturing GDP. It also contributes 31 per cent of the GDP from service activities, and 37 per cent of India’s manufacturing output to the Indian economy. Apart from that, the MSME sector also facilitates job creation. The sector has provide employment opportunities to more than 120 million people, and counting. In terms of trade, Indian SMEs contribute almost 46 per cent of the overall exports from the country, and has maintained a consistent growth rate of 10 per cent.

Another factor that has helped small businesses flourish in India is the internet, which has proven to be a boon for this sector. When Internet first made its debut in India back in 1996, only a handful of people had managed to recognize its potential in the corporate sphere, and how it can help businesses grow. These creative thinkers led the way in promoting their businesses online, and used its power to connect each and every aspect. In the backdrop of manufacturing units, a realization kicked in: Since buyers and suppliers are constantly try to reach out to each other, using the internet to facilitate this communication channel could prove to be an excellent idea; and at the same time, aid the growth of several SMEs.
The rise of the SME sector also managed to accelerate development in Tier-1 and Tier-2 cities, and played a key role in improving the individual economic scenario in each region. In fact, the success of small businesses in these areas eventually inspired many ambitious individuals to capitalize on the host of prospects available in other markets as well, mainly in tier-3 and tier-4 cities.

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Tier-3 and tier-4 cities emerging as next SME hubs in India

While the growth and prevalence of SMEs has been generally recorded in tier-1 and tier-2 cities, it seems that the trend is now slowly shifting towards tier-3 and tier-4 cities as well. Inspired by increasing opportunities for such businesses, many have now begun to invest in small businesses within tier-3 & tier-4 cities, and in the process, allowing such regions to develop at an unprecedented rate.

Factors contributing to the growth of SMEs within tier-3 & Tier-4 cities

Little to no competition in new markets – Markets in Tier-1 and Tier-2 cities have been exploited to a point, where finding new opportunities have begun to seem like a tedious task. With multiple players competing to be on top in various segments, new businesses hoping to enter this space seem to have a hard time in surviving it in the long run. On the other hand, due to lack of exposure, tier-3 and tier-4 cities are increasing becoming noticed by hopeful entrepreneurs in a bid to create a successful business without having to worry about the competition. These new markets are proving to be a boon for several small business owners, allowing them to set themselves as prominent market leaders when the time is just right.

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Exposure to new trends and networks via internet – As previously stated, the internet is one of the most prominent growth drivers of the Indian SME sector. It allows entrepreneurs to explore lucrative markets and latest trends without having to worry about geographical limitations. Furthermore, it is also helping small businesses connect with manufacturers, exporters, suppliers, and buyers to generate value from unlimited online trade opportunities and buyer enquiries via dedicated online platforms.
Apart from the above mentioned factors, improvement in access to financial assistance is also reassuring many SME owners to scale their businesses without any hassle.

Nowadays, it is being observed that the growth and expansion of SMEs is not limited to cities anymore. The CII report states that over 55.3 per cent of MSMEs are based out of rural areas, which certainly indicates the utilization of India’s significant rural workforce population in the MSME sector. Furthermore, it also manages to demonstrate the importance of such enterprises in supporting efforts towards sustainable & inclusive development, along with creating large scale employment, especially in the rural regions.

Going by such facts, it can be safely concluded for now that India’s tier-3 and tier-4 cities are certainly emerging as the next SME hubs, and in doing so, fortifying the position of this sector as the backbone of Indian economy.

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