Growth Potential: Tier II and Tier III Cities in India

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8. Government Policy

Going by a World Bank estimate, investments in infrastructure development in India needs to be to the tune of an additional 3-4% of GDP if it has to sustain its current levels of growth and see more widespread benefits of this growth. Reports indicate that there are plans to invest nearly US$ 350 billion on infrastructure over the next five years. This includes plans to convert all major national highways to 4-lane drives and complete the Golden Qudrilateral or North-South-East-West (NSEW) corridor with nearly 13,000 kms of roads.

While these cities promise to blossom with all this attention, the degree to which they really develop will depend to a large extent, on the state governments and the policies they embrace. Pro-active policies to further build on educational facilities and other infrastructure will attract more firms. For instance, the burgeoning number of malls and retail space in Delhi and NCR are at least in part thanks to the proactive measures of the government to make land available for commercial development. The relaxation of rules to allow property funds and investment trusts in India will also boost development of the tier II and tier III cities.

Unless there is a concerted initiative by the Government and the Private sector to counter the above challenges, outsourcing firms are weighing options of expanding in the Philippines or Latin America as opposed to spilling over into the tier II cities. Dayanidhi Maran, the Union Minister for Communications and IT urged firms to set up shop in the tier II cities in his address at the inaugural session of Nasscom’s 2007 Leadership Summit. He indicated that the Government was considering the idea of developing modern townships for industries such as IT and BPO with a view to decongest tier I cities struggling to cope with infrastructure demands as well as diffuse development and prosperity to other cities.

9. Conclusion
And so the tier II and III cities are set for a roller coaster ride into the future. But what does this mean to the regular guy on the street? It means huge changes in lifestyle – which may or may not be a welcome change depending on how one looks at it. But on the positive side, this means a quantum jump in employment opportunities within his comfort zone – his city. It also means that a lot of his aspirations in terms of entertainment and spending will be realised. Multiplexes will replace the traditional single screen “movie talkies”, and malls and single brand stores will replace the smaller multi-brand stores. Owners of real estate will see their investments grow tremendously.

So far so good – how soon will all this happen? Real soon, by the looks of it. A word of caution though, city planning and investments in infrastructure have to keep pace if we want to retain and up the quality of life – finally, isn’t that what all this growth is about?

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