The future expansion of businesses and economies is centered around Tier-2 and Tier-3 cities in India

The future expansion of businesses and economies is centered around Tier-2 and Tier-3 cities in India.

 

In 2022 the Asia Pacific BPO market was valued at USD 66.27 billion. Forecasts indicate a projected growth rate of 10.7% from 2023 to 2030. The increasing volume of data drives organizations towards BPO solutions, while the rapid expansion of service delivery platforms and rising demand for outsourcing services across diverse industries are expected to motivate further regional market growth. India has functioned as a global services provider since the beginning of process outsourcing, benefiting with exceptional talent-cost benefits and helping business surroundings. 

 

Tier 1 cities of India are Bangalore, Hyderabad, Delhi-NCR, and Mumbai, which are primary HUBs, and Pune and Chennai are newly counted and have seen most of the growth and persist in attracting firms striving for complicated skills. For more than two decades, tier 1 cities of India have monopolized global services processing and delivery. Now it's time for tier 2 and tier 3 cities to gain traction for becoming the successive hot spots. Tier 2 and 3 cities are rising as the new development hubs and attracting investment from the global map.

 

Across-the-board acceptance of hybrid working environments and co-working models workspace has increased the potential for hiring from tier 2 and 3 cities. Modern Businesses prefer to diversify and influence workforces with reverse migration from metropolitan cities to hometowns post-pandemic stock the growth of tier 2 and 3 cities. 

 

With a low-to-mitigate business disruption risk offering high stability of the financial environment and a regulatory environment, tier 2 cities are rapidly revolving into new technology hubs for billions of tech companies in India. The technology industry of India has grown in the last decade with tremendous growth and has seen in the variety of services offered by the industry like traditional information technology services, Business Process Management (BPM) services, engineering, research and development (ER&D) services and software product segments has shown potent evolution. 

 

In future times, modern businesses require careful review of the ways of working and seek to optimize costs, outcomes, and talent. We are optimistic about the long-term opportunities for the Indian economy to maintain its position as a reliable destination delivering global services. Indian economy is expecting the tier 1 cities to continue flourishing and tier 2 and 3 to push to the next level of growth wave for the global services industry.

 

Tier-2 cities are experiencing a surge in business ecosystem expansion due to the availability of enriched talent at reduced costs along with improving infrastructure and enhanced social security measures. Multiple enterprises have opened in cities like Visakhapatnam, Coimbatore, Jaipur, Vadodara, Kochi, Chandigarh, and considerable zones. Services provided from these locations include supply chain and procurement, finance and accounting, engineering, human resources, research and development, quality assurance, as well as digital cloud and automation services.

 

Several factors have contributed to the growth of Tier-2 locations that are listed here:

 

Resources Availability

 

Tier-2 cities stand as centers for essential specialized and niche skills. 

These cities have matured with the availability of professional and employable resources. The attrition rates in Tier-2 cities have been observed to be 10% less than in Tier-1 cities.

 

Business surroundings

 

Special Economic Zones (SEZs) have promoted the IT industry set up in Tier-2 cities. State Governments also incentivize businesses to set up new centers or expand existing setups into non-Tier-1 locations by providing an additional capital subsidy over and above the eligible limit.

 

Expanding and Extending Infrastructure:

 

Tier-2 cities have experienced a significant rise in the number of co-working spaces. Many Tier-2 cities boast superior road infrastructure compared to several Tier-1 cities. There has been a noticeable increase in scheduled domestic passenger traffic in Tier-2 cities compared to Tier-1 cities. The Indian government is focusing on improving air connectivity to Tier-2 and Tier-3 cities.

 

Cost Benefit

 

The total operational costs have decreased due to the lower costs of talent and infrastructure available in Tier-2 cities. Typically, Tier-2 cities have a 10% to 35% lower cost of living compared to the nearest Tier-1 location. The affordability of living expenses, coupled with the growing presence of healthcare facilities and educational institutions, enhances the overall quality of life in Tier-2 cities relative to Tier-1 cities.

 

Social Aspects

 

Concerning cost elements and social factors, Tier-2 cities are more appealing than Tier-1 cities. The gap in cost element is significant between Tier 1 and 2 cities. Nevertheless, the disparity is narrowing due to recent trends like reverse migration, the adoption of remote working models, upcoming infrastructure projects in Tier-2 cities, and government policy incentives encouraging businesses to expand into non-Tier-1 locations in India.

 

While the pandemic has caused a lot of devastation, it has also compelled organizations to optimize their costs and resources, and this has covered the way for moving work and resources to Tier-2 and Tier-3 cities. This migration will move the industry towards a truly global workplace without stressing about lifestyle challenges, real estate costs, and general living standards and will prove good for the industry in the long run.