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The Rise Of Tier-Two India

July 2007
The Rise Of Tier-Two India

Chandigarh in the north, Vizag in the east, Mysore in the south, and Pune in the west are just a few examples of the up-and-coming tier-two (or 2nd tier) cities in India. They're at the forefront of the rapid urbanization occurring outside India's major metros, which, as observers point out, will reach the limits of growth in the not-too-distant future. Apart from the overcrowding and deteriorating infrastructure, rising costs in the big cities have also made this idea more attractive to businesses and residents. The government is actively supporting 63 tier-two cities for development, with Nagpur getting the most attention. Reportedly, $280 million is being spent on this city in central India for projects ranging from roads, parks and malls to a metro system and another airport.

The spread of urbanization seems relentless. A recent McKinsey report shows that, by 2025, urban consumption in India will rise by 20 percent to reach 62 percent. By then, the number of affluent Indians is expected be larger than Australia's current population. "While much of this new wealth and consumption will be created in urban areas, rural households will benefit, with annual real rural income growth per household accelerating from 2.8 percent over the past decades to 3.6 percent over the next two," adds the report. Also by 2025, India will have the world's 5th biggest consumer market (up from no. 12 today), but the really good news is that "over 291 million people will move from desperate poverty to a more sustainable life."

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