Micro, Small, and Medium Enterprises (MSMEs) are transforming India’s employment landscape by creating a significant number of jobs in tier II and III cities. Currently, 49 million MSMEs are registered under the Udyam portal, employing more than 210 million people, making them critical contributors to India’s workforce.
A report by KPMG and TiE Bangalore, released on Tuesday, highlights that this number could grow in the coming years due to improving physical infrastructure, such as better roads, airports, and digital connectivity, which are turning these smaller cities into thriving business hubs.
The report, titled ‘Democratisation of Entrepreneurship,’ released at the TiE Global Summit in Bengaluru, reveals that 20.5% of MSMEs in India are owned by women. It further notes that the country has the potential to create over 30 million new women-owned enterprises, which could generate 150 to 170 million jobs.
“Boosting venture capital funding in women-led startups in India is essential to unlocking the country’s untapped entrepreneurial potential and driving inclusive economic growth,” the report states, adding that this would also help tap into grassroots innovation.
The study also highlights the growth of India’s entrepreneurial ecosystem beyond its metropolises, with tier II and III cities fostering startups by providing access to talent and untapped markets. About 45% of the 1,40,000 Department for Promotion of Industry and Internal Trade (DPIIT)-recognized startups are based in tier II and III cities.
Earlier, ET had reported on a trend where High Net Worth Individuals (HNIs) are increasingly looking at small towns for investments, particularly supporting ideas in their hometowns. The KPMG report identifies a similar wave, noting, “Startups in tier II and III cities typically focus on solving local or regional problems, often catering to underserved populations.” The report also observes substantial growth in sectors such as agritech, healthtech, fintech, and edtech, with startups addressing the unique needs of rural and semi-urban areas.
Despite this progress, challenges persist in democratizing startups, requiring urgent policy interventions. The report highlights that large tech companies dominate markets, restricting smaller startups’ access to resources and fair competition. “Many entrepreneurs in tier II and III cities struggle with poor digital infrastructure and lack of funding compared to metro-based startups,” it adds. Additionally, cultural norms favouring stable jobs over entrepreneurship and complex regulatory requirements create further barriers.
