The Commerce Ministry has directed all states and Union Territories (UTs) to develop a "City Level Economic Vision for 100 Tier 2 and 3 Cities" by June 2026. This initiative aims to foster manufacturing hubs in 1,039 out of 7,935 towns across India, extending beyond traditional Tier 1 industrial cities.

The plan, outlined by the Department of Promotion of Industry and Internal Trade (DPIIT), was discussed during the Fourth National Conference of Chief Secretaries in December 2024. The goal is to substantially increase the manufacturing sector's contribution to India’s Gross Value Added (GVA) from its current share of 17%.

Strategic Shift to Tier 2 and 3 Cities

Manufacturing in Tier 2 and 3 cities is seen as crucial to India's economic development. The government aims to tackle infrastructure issues, improve land availability, enhance logistics, develop workforce skills, and reduce the compliance burden on businesses to establish a thriving manufacturing ecosystem.

The initiative will focus on capital-efficient and labor-intensive industries in states with low Gross State Domestic Product (GSDP), while states with higher GSDP and established manufacturing bases will prioritize R&D and high-tech industries. This regional approach ensures that states can leverage their unique strengths and address specific challenges.

Key Timelines and Enablers for Growth

The government has earmarked specific timelines and key enablers to support these reforms. By June 2026, states are expected to implement State Logistics Action Plans based on the LEADS (Logistics Ease Across Different States) assessment. Additionally, states are urged to streamline business processes by decriminalizing certain state laws and improving single-window systems by December 2025.

In terms of industrial infrastructure, the Ministry has set a target to develop 100 "plug and play" industrial parks with flexible land lease policies by December 2025. States are also expected to integrate the PM Gati Shakti National Master Plan for large-scale industrial projects and upgrade the infrastructure of 1,000 Industrial Training Institutes (ITIs) to support skills development.

Boosting Employment through Manufacturing

By shifting manufacturing focus to Tier 2 and 3 cities, the government aims to increase the share of manufacturing in employment from the current 12% to 22% by 2047. The strategy is seen as a crucial step to create a more balanced economic ecosystem that drives employment growth and boosts industrial output across the country.