Emerging tier-2 hubs in India offer ideal blend of outcome and efficiency for the tech industry, says Deloitte and nasscom report

• The report delves deep into the emergence of vibrant tech hubs across various tier-2 cities and explores the technology industry’s path.
• A multi-tier location approach: Talent pool costs are 25-30 percent lower than those in mature hubs, with 50 percent cost savings in real estate rentals compared with mature hubs
• 60 percent graduates from small cities in key fields, offering a competitive edge to enterprises
• 39 percent of the country’s start-ups based in emerging cities, as of 2022

India’s technology landscape is undergoing a sweeping transformation, reveals a report from Deloitte India and nasscom. Focusing on 26 cities of high potential, the report examines five overarching pillars: talent, infrastructure, risk and regulatory environment, start-up ecosystem, and social and living environment, which are vital for establishing a flourishing technological landscape. India’s ascendancy as a ‘Digital Talent Nation,’ spearheading global aspirations to become a digital technology hub, is tangible. Fueled by rapid infrastructure growth, diverse skills, burgeoning start-ups, and governmental initiatives, these emerging hubs are gearing to achieve the tier-1 status.

Workforce momentum and talent surge

India has emerged as a leading “Digital Talent Nation”. It is also leading the race to become the global digital technology hub. At present, 11-15 percent of India’s tech talent resides in tier-2 and tier-3 cities. As decentralisation of work gains momentum, many new opportunities open for people in emerging cities. With 60 percent of India’s graduates in engineering, arts, and science, smaller towns are emerging as a wellspring of potential.

The 26 promising locations identified in the report have the potential to become the epicenter of innovation and growth. This trend is fueled by a highly proficient workforce in cutting-edge digital technologies, with about 8 lakh individuals within these emerging hubs adept in the latest tech domains. These emerging cities are witnessing a surge in digitally skilled workforce, with over 100,000 professionals contributing to their growth.

Cost advantage: Emerging cities deliver more for less

In emerging cities, businesses enjoy a 25-30 percent cost advantage in talent pool costs and a striking 50 percent lower real estate rental compared with mature hubs. This economic advantage makes these cities an attractive choice for growth without having to loosen the purse string much. Corporations are swiftly embracing this trend. Over 140 Global Capability Centres (GCCs) have found a home in these locations, highlighting the growing interest of global enterprises in these promising emerging hubs.

Economic resilience and innovation

Beyond the cost advantage, tier-2 cities have become breeding grounds for innovation, nurturing a mutually beneficial relationship between start-ups and established corporations. In the past decade, this dynamic ecosystem has revolutionised the sector, creating about 900,000 direct and 300,000 indirect jobs. About 39 percent of the country’s start-ups (over 7,000) operate in emerging hubs spanning industries from DeepTech to Business Process Management (BPM).

Sumeet Salwan, Partner, Deloitte India, said, India’s significance in the tech services sector remains robust and is positioned for sustained and differentiated prominence in the years ahead. While big cities were the focus in the past, the post-pandemic era witnesses a remarkable decentralisation of work across the nation. Today, about 60 percent of India’s overall graduates come from smaller towns and 30 percent of total graduates relocate to tier-1 cities seeking employment. These locations that currently account for 10-15 percent tech talent, provide promising growth potential when supported by the governments’ commitment to world-class infrastructure – an ‘if you build it, they will come’ approach for expansion.”

He added, “Within the technology sector, the growth in digital and innovation skills in these emerging hubs have also been noteworthy. Start-ups here grew 50 percent from 2014-2018, with expectations of 2.2X growth by 2025. This reinforces the well-established notion of a symbiotic relationship between the tech sector and the innovation ecosystem. Supported by governments’ push, availability of talent, and the new operating model where work proliferates equitably, these emerging hubs offer the potential for exponential growth.”

Sukanya Roy, Head GCC and BPM, at nasscom said, “As companies worldwide continue to actively revisit ways of working with an eye on optimising outcomes, costs, and talent, the opportunity and possibility to develop alternative tech hubs are now becoming extremely essential. India is expected to have a skilled talent surplus by 2030. These hubs offer companies a compelling blend of advantages: access to a fresh, skilled talent pool, cost-effective operations, and robust infrastructure. As state governments and local ecosystems invest in skilling and improved ease of doing business, these burgeoning hubs are now essential waypoints in India’s journey to becoming a global technology powerhouse.”

The government and corporate sectors are joining forces in emerging cities to improve the ease of doing business. The Skill India initiative is a great example of this collaboration, with more than 50 companies providing practical technical training. With 83 of 242 Special Economic Zones and 15 of 60 software technology parks of India centres located in emerging cities, the country’s transformational narrative unfolds across its geography. Fueled by a US$ 1.4 trillion investment in infrastructure, our digital transformation story gets an added boost, manifested by the impending rollout of 5G. This isn’t just an economic narrative, but an opportunity, fostering a robust ecosystem for innovation, employment, and a brighter tomorrow for India.

About Report

A comprehensive report unveils valuable insights on 26 emerging locations that have the potential to become significant opportunities for enterprises to set-up tech-hubs. After conducting extensive research and holding in-depth conversations with industry leaders, academic institutions, recruiters, and other key players in the ecosystem, the report provides a deep understanding of their current landscape, talent potential, and success factors. The shortlisted cities have been analysed on five key pillars for establishing technology hubs: talent, infrastructure, risk and regulatory environment, start-up ecosystem, and social and living environment.