How is the growth of Tier 2 cities related to the rise of a new middle class with an emphasis on the culture of consumption? (Answer in 150 words) 10M

The Indian government has categorized cities with populations ranging from 50,000 to 100,000 as tier 2 cities.

In a socio-economic hierarchy, the middle class refers to individuals and households who fall between the working class and the upper class. Typically, in Western cultures, those in the middle class have a higher proportion of college degrees than those in the working class, greater income available for consumption, and may own property. Many professionals, managers, and civil servants fall within the middle class.

Relationship between New middle class and tier 2 cities

• Entrepreneurship Boost: With the advent of LPG era, tier 2 cities witnessed a significant surge in white-collar employment due to an increase in entrepreneurial activity. Globalisation played a key role in the growth of the service sector, which contributes to over 50% of India’s GDP and provides employment to more than 64% of individuals in tier 2 and tier 3 cities.
• The rise in wages, the digital revolution, and the westernisation of habits, all propelled by globalisation, have influenced popular culture and altered consumption patterns among this class.
• Government Initiatives: The government has implemented various schemes such as Make in India, Stand up India, Startup India, MUDRA Yojana, JAM trinity, UDAN, etc., to promote the culture of consumption by increasing disposable income.

Reasons behind the emergence of Tier 2 Indian cities as major growth engines

• Favorable for Large Companies: Cities such as Jaipur, Patna, Indore, and Surat, categorized as tier 2, have demonstrated economic growth rates exceeding 40%.
  • Increasing Disposable Income: With an estimated 80% of households projected to have middle-class incomes by 2030, disposable income is expected to rise. In India, consumer behavior is highly influenced by the value for money factor.
• E-commerce Boom: In India, traditional “kirana” stores, which account for 88% of the retail market, exceed 15 million in number. Families often restock fresh produce every two to three days through e-commerce platforms.
• Employment Opportunities: Tier-2 cities serve as a destination for potential employees from rural areas, providing them with diverse avenues of employment.
• Lower Cost of Living: The affordable cost of living in tier 2 cities not only encourages consumption but also facilitates a better lifestyle.

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