From supporting role to centre stage

India's tier-2 cities are emerging as the new manufacturing growth engines. Can they deliver the $5 trillion dream?

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The narrative of India's industrial ascent has long been centred on its traditional metropolitan powerhouses—Mumbai, Chennai, the National Capital Region (NCR), and Bengaluru. These cities, the cradles of India's initial post-liberalisation boom, are now victims of their own success. Facing critical saturation, marked by soaring land acquisition costs, debilitating traffic congestion and infrastructure strained to its breaking point. The economic viability of further large-scale industrial expansion in these hubs has significantly diminished.

A fundamental shift is now underway, driven by a confluence of strategic government policy, transformative infrastructure development and compelling economic logic. The future of Indian manufacturing growth is, by necessity, becoming profoundly decentralised. Tier-2 and Tier-3 cities are no longer merely supporting actors, but they are rapidly emerging as the most viable, cost-effective, and strategically advantageous locations for the next wave of industrial expansion. This transformation is not a mere aspiration but a tangible reality, turning India's heartland into its new industrial frontline.

The urgency and context for this shift are clear and compelling:

• Policy push: Both the Central and State Governments are aggressively incentivizing manufacturing units to move to smaller clusters to drive regional employment and economic equity. National initiatives like the Production Linked Incentive (PLI) scheme, which has seen production surge by 146% from ₹2.13 lakh crore in FY 2020-21 to ₹5.25 lakh crore in FY 2024-25, naturally nudge manufacturers toward locations where they can maximize profitability and operational efficiency.