Tier-3, Tier-4 cities next SME hubs

Tier-3, Tier-4 cities next SME hubs

Over the past decade, the small and medium enterprises (SME) sector gained substantial growth owing to rapid development, technological disruption, and greater awareness around this space. In addition, the vast scope for growth present within this industry has also encouraged many budding entrepreneurs to explore possibilities within multifarious industries and build successful businesses.

According to a Confederation of Indian Industry (CII) report, the MSME sector is the backbone of India’s national economic structure, and is constantly strengthening the economy in the face of various global economic meltdowns and adversities. Comprising of more than 51.1 million units throughout the country, the MSME sector contributes up to 7% of the manufacturing GDP.

It also contributes 31% of the GDP from service activities, and 37% of manufacturing output to the economy. Apart from that, the MSME sector also facilitates job creation. The sector has provide employment opportunities to more than 120 million people, and counting. In terms of trade, SMEs contribute almost 46% of the overall exports from the country, and has maintained a consistent growth rate of 10%.

Another factor that has helped small businesses flourish is the Internet, which has proven to be a boon for this sector. The creative thinkers led the way in promoting their businesses online, and used its power to connect each and every aspect.

In the backdrop of manufacturing units, a realisation kicked in: since buyers and suppliers are constantly trying to reach out to each other, using the internet to facilitate this communication channel could prove to be an excellent idea; and at the same time, aid the growth of several SMEs.

The rise of the SME sector also managed to accelerate development in Tier-1 and Tier-2 cities, and played a key role in improving the individual economic scenario in each region. In fact, the success of small businesses in these areas eventually inspired many ambitious individuals to capitalise on the host of prospects available in other markets as well, mainly in Tier-3 and Tier-4 cities.

While the growth and prevalence of SMEs has been generally recorded in Tier-1 and Tier-2 cities, it seems that the trend is now slowly shifting towards Tier-3 and Tier-4 cities as well. Inspired by increasing opportunities for such businesses, many have now begun to invest in sm­all businesses within Tier-3 and Tier-4 cities, and in the process, allowing such regions to develop at an unprecedented rate.

Contributing factors
• Little to no competition in new markets: Markets in Tier-1 and Tier-2 cities have been exploited to a point, where finding new opportunities have begun to seem like a tedious task. With multiple players competing to be on top in various segments, new businesses hoping to enter this space seem to have a hard time in surviving it in the long run. On the other hand, due to lack of exposure, Tier-3 and Tier-4 cities are increasing becoming noticed by hopeful entrepreneurs in a bid to create a successful business without having to worry about the competition. These new markets are proving to be a boon for several small business owners, allowing them to set themselves as prominent market leaders when the time is just right.

• Exposure to new trends and networks via internet: The Internet allows entrepreneurs to explore lucrative markets and latest trends without having to worry about geographical limitations. Furthermore, it is also helping small businesses connect with manufacturers, exporters, suppliers, and buyers to generate value from unlimited online trade opportunities and buyer enquiries via dedicated online platforms.

Apart from the above mentioned factors, improvement in access to financial assistance is also reassuring many SME owners to scale their businesses without any hassle.

Nowadays, it is being observed that the growth and expansion of SMEs is not limited to cities anymore. The CII report states that over 55.3% of MSMEs are based out of rural areas, which certainly indicates the utilisation of significant rural workforce population in the MSME sector. Furthermore, it also manages to demonstrate the importance of such enterprises in supporting efforts towards sustainable and inclusive development, along with creating large scale employment, especially in the rural regions.
Going by such facts, it can be safely concluded for now that Tier-3 and Tier-4 cities are cert­ainly emerging as the next SME hubs, and in doing so, fortifying the position of this sector as the backbone of Indian economy.

(The writer is Founder and Director, ExportersIndia.com)