In a bid to accelerate economic growth and decentralize industrial development, the Government of India is rolling out a transformative initiative to bolster manufacturing capabilities in Tier 2 and 3 cities. With a focus on creating economic opportunities beyond traditional industrial hubs, this initiative seeks to enhance the contribution of manufacturing to the Gross Value Added (GVA) and boost employment across the nation.
The Commerce Ministry has tasked states and Union Territories (UTs) with formulating a ‘City-Level Economic Vision’ for 100 selected cities by June 2026, paving the way for a comprehensive strategy to unlock the untapped potential of these regions.
Strategic Framework: A Decentralized Manufacturing Ecosystem
The initiative is part of a larger strategic framework spearheaded by the Department for Promotion of Industry and Internal Trade (DPIIT). This vision was extensively deliberated during the Fourth National Conference of Chief Secretaries, where key policy directions were laid out.
The strategy targets 1,039 towns, aiming to shift the focus of manufacturing from traditional industrial centers to less-developed areas, thereby ensuring balanced economic growth across the country.
The Role of Tier 2 and 3 Cities in India’s Growth
Tier 2 and 3 cities are pivotal to India’s economic aspirations. These regions offer a unique combination of:
- Demographic Dividend: A young, affordable workforce with high productivity potential.
- Cost-Effective Operations: Lower land and labor costs compared to Tier 1 cities.
- Scope for Expansion: Untapped markets and industrialization opportunities.
To harness these advantages, the government plans to address key challenges such as infrastructure development and logistics efficiency, creating a robust ecosystem conducive to manufacturing growth.
Tailored Strategies for States
The government’s approach recognizes that different states possess varying strengths and limitations. The framework proposes customized strategies:
- Low-GSDP States: These regions are encouraged to focus on capital-efficient and labor-intensive industries, fostering immediate job creation and economic activity.
- States with Established Industrial Bases: These states are advised to prioritize high-tech industries, research and development (R&D), and innovation-driven sectors, reinforcing their position as leaders in advanced manufacturing.
This state-specific approach ensures that every region leverages its unique resources and capabilities for maximum impact.
Key Enablers of Manufacturing Growth
To achieve its ambitious goals, the government has identified several key enablers:
- Industrial Infrastructure
- Flexible land lease policies to attract investors.
- Development of 100 plug-and-play parks by December 2025.
- Logistics
- States will implement a State Logistics Action Plan by June 2026.
- Formulation of City Logistics Plans for 25 cities by December 2026.
- Ease of Doing Business
- Enhancement of the single-window clearance system.
- Reduction of compliance burdens by December 2025.
- Skilling and Entrepreneurship
- Conducting skill gap studies to align workforce training with industry needs.
- Establishing 100 start-up incubation centres by December 2029 to foster innovation and entrepreneurship.
Timelines and Employment Growth Objectives
Specific timelines have been outlined to ensure the seamless implementation of reforms:
- June 2026: Submission of City-Level Economic Vision and State Logistics Action Plans.
- December 2025: Development of flexible land lease policies and improvements to the single-window system.
- December 2026: Completion of City Logistics Plans for selected cities.
The government also aims to double the share of manufacturing in employment, increasing it from 12% to 22% by 2047. This ambitious goal seeks to address decades of stagnation in manufacturing employment, which has remained largely unchanged since 1972-73.
Vision 2047: A Decentralized Manufacturing Revolution
The government’s initiative represents a bold effort to decentralize India’s manufacturing landscape. By focusing on infrastructure development, logistics optimization, and workforce skilling in Tier 2 and 3 cities, the plan aims to unlock immense potential for job creation and economic diversification.
This visionary approach ensures that these emerging cities become engines of growth, contributing significantly to India’s journey toward becoming a $10 trillion economy by 2047.