Beta cities - on the threshold
India’s tier II cities have benefited to a large extent from the boom of the past few
years but need to get their act together to draw investment and attention away from
the tier I cities.
Source: City Skyline of
Demand Curve India
Just as emerging economies are those that
stand on the threshold of advancing into the big
league, there are emerging cities in India: the
cities that have the potential to match the larger
cities in market size.
Indeed some among them will become elite
cities eventually. These Beta cities, as opposed
to the Alpha top-tier cities of India, have diverse
characteristics. Many of these cities are state
capitals such as Jaipur and Lucknow, benefiting
from better infrastructure and public services.
Cities such as Jamshedpur and Faridabad have
been industrial centres for decades now, but
seemed to be content giving precedence to
other newer centres that have grown. Some
such as Indore have been threatening to make it
big for many years, but never quite managed it.
Some others such as Kanpur have somehow
lost their way.

India’s tier II cities, are among the largest urban markets and can at anytime break
into the elite club the way Surat and Coimbatore have.
Cities such as Thane and Thiruvallur have boomed, thanks to their proximity to metros. Except for
Kanpur, all have had double-digit, or close to that, annual growth in their market size over the past two
years.
Whatever be their current status, these Beta cities, or India’s tier II cities, are among the largest urban
markets and can at anytime break into the elite club the way Surat and Coimbatore have. They have
benefited to a large extent from the boom of the past few years but need to get their act together to
draw investment and attention away from the tier I cities. What is needed is a concerted plan of action
to improve infrastructure and governance.
These cities will over the next few years grow in importance and in a range of areas. Many of these
cities were in the past specializing in a few sectors and industries; but with growing population and
large-scale in-migration, they are steadily growing in the range of activities that are undertaken within
and in their vicinity. The bulk of these cities have quite poor public infrastructure (since serious urban
investment in the past has been limited to state capitals); but that is already changing rapidly. Supply
always finds a way to meet the demand, even if the governments are unresponsive. High incomes in
Indore, for instance, and availability of credit led to high auto demand; when the urban government
could not provide that, residential areas started to put up their own roads. Residents of Patna are
working with the government for improved law and order, the industrial community in Ludhiana is
working together to improve the city, and there are many such examples. Cities such as Coimbatore
and Surat have in the past already shown how cities and administration in the second tier towns of
India are slowly but steadily creating urban communities that will one day totally change India’s urban
landscape.
These cities currently are much smaller than the top metros, but many have per capita incomes that
are higher than those in the top metros, and most of them have sustained double-digit growth. It is only
a matter of time before they become important metros in their own right.
Demand Curve is a weekly column by research firm Indicus Analytics Pvt. Ltd on consumer trends and
markets.