India’s Manufacturing Vision for Tier 2 and 3 Cities

January 23, 2025

The Government of India is focusing on enhancing manufacturing capabilities in Tier 2 and 3 cities. This initiative aims to boost the country’s economic growth by increasing the contribution of manufacturing to the Gross Value Added. The Commerce Ministry has mandated states and Union Territories (UTs) to develop a ‘City Level Economic Vision’ for 100 selected cities by June 2026.

Strategic Framework Overview

The initiative is part of a broader strategic framework established by the Department of Promotion of Industry and Internal Trade (DPIIT). This framework was discussed at the Fourth National Conference of Chief Secretaries. It targets 1,039 towns, aiming to shift manufacturing focus from traditional industrial hubs to less developed areas.

Importance of Tier 2 and 3 Cities

Tier 2 and 3 cities are vital for India’s economic growth. They offer a demographic dividend, an affordable workforce, and potential for industrial expansion. The government believes that addressing infrastructure challenges and enhancing logistics will create a robust manufacturing ecosystem in these areas.

Tailored Approaches for States

States with lower Gross State Domestic Product (GSDP) are encouraged to prioritise capital-efficient and labour-intensive industries. Conversely, states with established manufacturing bases should focus on research and development, high-tech industries, and innovation. This tailored approach allows states to leverage their unique strengths.

Key Enablers for Manufacturing Growth

The government has identified several key enablers necessary for manufacturing growth, including:

Industrial Infrastructure: Development of flexible land lease policies and 100 plug-and-play parks by December 2025.
Logistics: Implementation of a State Logistics Action Plan by June 2026.
Ease of Doing Business: Improvement of the single-window system and reduction of compliance burdens by December 2025.
Skilling and Entrepreneurship: Conducting skill gap studies and establishing 100 new start-up incubation centres by December 2029.

Timelines for Implementation

States and UTs have been given specific timelines to implement various reforms. Key deadlines include: – June 2026 – Submission of City Level Economic Vision and State Logistics Action Plan. – December 2025 – Development of flexible land lease policies and improvement of the single-window system. – December 2026 – Formulation of City Logistics Plans for 25 cities.

Employment Growth Objectives

The government aims to increase the share of manufacturing in employment from 12% to 22% by 2047. This goal reflects the stagnant employment share in manufacturing since 1972-73. By expanding manufacturing into Tier 2 and 3 cities, the government anticipates boost in job creation.

Conclusion of the Initiative

The initiative represents a comprehensive effort to decentralise manufacturing in India. By enhancing infrastructure, logistics, and workforce skills in Tier 2 and 3 cities, the government aims to encourage a vibrant manufacturing ecosystem that can contribute substantially to the national economy.

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