Are Tier 2 & 3 Cities the Future for Indian Businesses?

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Table of Contents

In India, it is believed that a bright, young student who grew up in a small town works hard in school and college and excels. With big ambitions and attractive report cards, migrating to the nearest metropolis or tier 1 city is the next logical step. There is no doubt that life in the hometown is peaceful, but the career and academic opportunities in the big cities are too good to ignore.

This traditional trajectory has been reversed; after living in tier 1 or metro cities for a decade or two, many people, especially millennials, are returning to their hometowns. In India, tier 2 and 3 cities are surging as business hubs, opening up outstanding job opportunities. Because of technological advancements, these cities are attempting to compete with metros or tier 1 cities in terms of quality of life and convenience.

Nowadays, professionals can move to a small city to fulfill their dreams or improve career growth. The surge also happened due to the pandemic as professionals had to move back home. With the introduction to work from the home policy, they could continue working even from their hometown. Both professionals and the company figured out a new way that was just as efficient, if not more.

Exorbitant rents and soaring operational costs in tier 1 cities can be a massive barrier for startups setting up their businesses. Compared to industry giants, startups consider these initial costs to be much lower, find skilled candidates at lower rates, and local governments in tier 2 and tier 3 cities are more welcoming.

In recent times, tier 2 cities such as Surat, Jaipur, Patna, and Indore have documented an economic growth rate of more than 40%, making them the perfect geography for big firms. Setting up operations in these cities means welcoming financial advantages at various levels. Bigger working spaces are available at cheaper rates, which allows enterprises to operate on a larger scale. Tier 2 and tier 3 cities also offer a varied pool of fresh and young talent. When trained correctly, organizations can enjoy a large, skilled workforce at a fraction of the cost compared to tier 1 cities.

Tier 2 and Tier 3 cities the best choices

Why are Tier 2 and Tier 3 cities the best choices in 2023?

1. Houses Best Talents In The Industry:

Most companies are dealing with a series of difficult situations and are now providing more work flexibility to employees. A senior managing director and leader of India's most prominent firm mentioned that this migration would open up new pathways for local talents and support people seeking greater location flexibility.

Accounting offshoring organizations like MYCPE ONE also realize the value of opening offices in non-metro cities. They are opening up offices in tier 2 and 3 cities such as Surat, Chandigarh, Nashik, Raipur, and many more.

2. High Attrition:

Following the COVID-19 pandemic, digitalization has increased the demand for working professionals. Experts at every level of their careers are showered with opportunities, and organizations are giving away colossal raises to keep the best people in the industry. However, famous enterprises have been experiencing substantial attrition rates for a long time. And migrating to a small city can help them acknowledge the problem.

3. Paradigm shift:

A report submitted by Mckinsey states that "post-pandemic, employees prefer working from home for at least three days a week. More than 25% of participants suggested switching jobs if their company returned to complete on-site work." Today, mental health has become a top priority for employees post-pandemic. Mckinsey's study further says that more than half of the surveyed want their enterprises to adopt a hybrid working model.

Since the disruptions created by the COVID-19 pandemic has also pushed business globally to optimize their costs and resources, this is one of many reasons that has paved the way for migrating resources and operations to tier 2 & 3 cities.

The COVID-19 pandemic forced businesses to realize how they operate and minimize their costs and resources. This is another reason businesses felt that migrating to non-metro cities was a good idea.

Shawn Parikh

Co-Founder & CEO

Shawn Parikh is the CEO and Co-Founder of MYCPE ONE. A Chartered Accountant by qualification, he has over 15 years of experience of being a problem solver for small to mid-size firms and over time he has given consultation to thousands of CPAs, accountants and tax pros. Shawn has always been a big believer and advocate of social enterprises and small accounting firms & businesses. He consults and speaks on several topics ranging from Building Remote Team - Remote Working, Offshore Staffing, strategic planning, Scalability of Accounting Practice, cloud accounting, practice management, LinkedIn marketing, etc.