India's ascendancy as a digital talent nation and technology hub is visible, and the country's tier-II cities have the potential to become the epicentres of innovation and growth, according to a report from Deloitte India and Nasscom.
The report examines the trajectory of the technology industry and delves into the emergence of thriving tech hubs in tier-II cities. Focusing on 26 cities showing high potential, the report examines five overarching pillars—talent, infrastructure, risk and regulatory environment, startup ecosystem, and social and living environment, which are essential for creating a thriving technology environment.
Fuelled by infrastructure growth, diverse skills, burgeoning startups, and governmental initiatives, these emerging hubs are gearing to achieve tier-I status, the report said.
Workforce Momentum And Talent Surge
Currently, tier-II and tier-III cities are home to 11%–15% of India's tech talent. People in emerging cities have a lot of new opportunities as decentralisation of work picks up pace. Smaller towns are showing great promise because 60% of engineering, arts, and science graduates in India are from there.
“While big cities were the focus in the past, the post-pandemic era witnesses a remarkable decentralisation of work across the nation,” said Sumeet Salwan, partner at Deloitte India. “About 60% of India's overall graduates come from smaller towns and 30% of total graduates relocate to tier-I cities seeking employment. These locations provide promising growth potential when supported by the governments' commitment to world-class infrastructure,” Salwan said.
The cities mentioned in the report have the potential to become the nucleus of innovation and growth. A workforce that is highly adept at cutting-edge digital technologies—with around 8 lakh people in these emerging hubs skilled in the latest tech domains—is what is driving this trend. More than 1,00,000 professionals with digital skills are contributing to the growth of these hubs, according to the report.
Delivering More For Less
As compared with mature hubs, tier-II cities offer businesses the benefit of 25%–30% lower talent pool costs and almost 50% lower real estate rentals. Thanks to their economic edge, these cities are an attractive option for business growth without having to significantly loosen the purse strings.
Businesses are increasingly embracing this shift to tier-II cities in order to cut costs and boost growth. These locations are now home to over 140 global capability centres, demonstrating the interest of global organisations in these emerging hubs.
“As companies worldwide continue to actively revisit ways of working with an eye on optimising outcomes, costs and talent, the opportunity and possibility to develop alternative tech hubs are now becoming extremely essential,” said Sukanya Roy, head GCC and BPM at Nasscom.
Breeding Grounds For Innovation
Tier-II cities have also developed into innovation hotbeds, fostering a partnership between startups and legacy businesses. According to the report, this ecosystem has generated around 9,00,000 direct and 3,00,000 indirect jobs over the past decade. Over 7,000 of the country's startup businesses, or about 39% of the total, are based in emerging hubs spanning industries from deep technology to business process management.
"Startups here grew 50% from 2014-2018, with expectations of 2.2 times growth by 2025. This reinforces the well-established notion of a symbiotic relationship between the tech sector and the innovation ecosystem," said Salwan.
The government and corporate sectors are joining forces in emerging cities to improve the ease of doing business. Eighty-three out of 242 special economic zones and 15 out of 60 software technology parks of India are located in emerging cities.
“These hubs offer companies a compelling blend of advantages—access to a fresh, skilled talent pool, cost-effective operations, and robust infrastructure. As state governments and local ecosystems invest in skilling and improved ease of doing business, these burgeoning hubs are now essential waypoints in India's journey to becoming a global technology powerhouse,” Roy said.
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