According to United Nations-Habitat’s World Cities Report 2022, India’s urban population is estimated to increase from 483 million in 2020 to 675 million in 2035, which will be more than 40% of the total population. In such a scenario, it will be beneficial to have multiple urban centres spread across the country rather than having few Megacities.
Ways in which these Tier 2 and 3 cities can become the driver of the country’s economic growth in coming time:

• Tier 1 cities have become saturated in terms of utilization of resources and available opportunities for new economic activities. Thus, Tier 2 and 3 cities provide a significant edge over the larger cities in terms of their economical real estate, labour, and service costs.
• The pandemic has accelerated the movement of metropolitan dwellers to Tier 2 and Tier 3 cities to get away from polluted and crowded environments.
• These cities provide access to affordable housing and competitive education opportunities.
• Development of these cities will also help in more inclusive growth as it will facilitate an improved distribution of wealth, in due course increasing the status of rural India.
• Tier 2 and Tier 3 cities also provide a vast pool of untapped talent. When properly trained, companies can enjoy a large, highly skilled workforce. For example, according to the Ministry of Commerce and Industry nearly 50% of the recognised start-ups in India were from Tier 2 and 3 cities.
• Increasing infrastructure development in India has connected many lower tier cities. For example, cities like Ludhiana and Indore are now a part of the country’s developing multi-modal logistics network that promises to strengthen the supply chain in the country.

Key issues hindering the realization of economic potential of these cities:

• Lack of common economic vision and planning across different institutions. For example, the master plans of cities focus entirely on land use and zoning regulations, whereas the needs associated with promising city-specific economic activities are at times left uncatered.
• Challenges related to land such as delays in land acquisition, complex procedures for converting land from non-urban to urban/from agricultural to non-agricultural land.
• Non-integrated planning of urban and industrial infrastructure. For example, many industrial clusters have not catalyzed a well-planned urbanization in their neighbourhoods.
• Policy and regulatory constraints emerge due to fragmentation of responsibilities and limited ownership of economic initiatives between urban local bodies and state government agencies.
• Lack of funds as many of these cities face a crunch of financial capital as their local bodies lack tax base and revenue base to boost their infrastructure.
• Connectivity issue as many of these cities are not directly connected to ports or airports.

To address the above concerns, lessons can be drawn from the well performing large metro cities as well as from other global cities. Further, to harness the economic potential of Tier 2 and 3 cities, state governments can develop appropriate policy frameworks to address the bottlenecks and establish appropriate urban governance structures for coordination of spatial and economic planning.