How entrepreneurship is rising in small cities
This report is excerpted from CNBC’s ‘Inside India’ newsletter this week, which brings you up-to-date, informative news and market commentary on the emerging powerhouse. Subscriber Here.
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Aarushi Kilawat is a fashion entrepreneur from Jaipur, India, a small city of less than 5 million people; Mumbai is very different from Indian metropolises like Delhi and Bengaluru.
Her brand, The Loom Art, has been working with more than 500 artisans since 2018 to make clothes from hand-woven or hand-embroidered fabrics found in small towns across India.
These clothes are offered for sale in luxury stores in Mumbai, the financial capital of India with a population of over 20 million, and in Delhi, the capital of India, where prices range from 15,000 Indian rupees to 30,000 rupees (170-350 dollars). Some are even reaching stores in Spain and the US
Three years ago, the 31-year-old actress turned to the jewelery industry with a desire to expand her product range and inspired in part by introductions heard on a popular TV programme.Shark Tank India“
“I watched Shark Tank regularly after its launch,” he said, adding that the show helped make entrepreneurship a dinner table topic across India. She believes the upcycled brass jewelry brand could be a good choice to promote at the show.
During the pandemic, online shopping in india It went into overdrive and led to a boom in startups. In particular, 2021, the year when Shark Tank India launched, was a golden period for startups. sector reportedly At the time, it raised $42 billion, the most ever in a year.
As of February 2025, the government has recognized 157,000 startups across India; More than 51% of these were located in medium-sized urban centers, known as Tier-2 and Tier-3 cities based on population size and development levels.
Lower operating costs, better connectivity and a growing talent pool have made these smaller cities fertile ground for founders.
Aarushi is one of many entrepreneurs in India who are creating brands from these small hubs, all aiming to expand beyond their local markets.
Explosion in entrepreneurship
Amazon India on Monday said small cities “We are witnessing remarkable growth” On the Amazon Global Selling platform.
Exporters from the small cities of Karur and Erode in Tamil Nadu will surpass $180 million in sales in 2024, while Junagadh and Anand in Gujarat will surpass $100 million, Amazon said in a statement. Other cities on the list included Haridwar and Panipat.
“India’s wealth creation story is rapidly moving away from the centre,” said Anas Rahman Junaid, founder and principal researcher at Hurun India, a research firm. He added that although metro cities still dominate, smaller cities like Coimbatore, Surat, Indore and Lucknow have emerged as strong wealth engines.
One example of this is direct-to-consumer skincare brand Minimalist, also based in Jaipur. Instagram post We are in the middle of the pandemic in 2020.
The business grew sales from $3 million to $42 million in just four years, according to data from market research firm Tracxn. This scale and its popularity with online customers attracted the attention of Unilever’s India arm; The arm acquired Minimalist for Rs 2,706 crore in January this year, valuing it at more than five times its annual revenue.
“Tier 2 and Tier 3 cities are not just participating in the e-commerce ecosystem, they are powering it,” said Zaiba Sarang, co-founder of e-commerce shipping platform iThink Logistics.
“More than half of our daily deliveries now come from Tier-2 and Tier-3 locations, and outbound volumes are growing faster than ever before,” he said.
generation change
Historically, many small cities in India have been manufacturing centres, such as Agra for leather and carpets, and Surat and Jaipur for textiles.
Lower operating costs, cheaper labor and established supply networks attract a new generation of entrepreneurs to their countries.
Kilawat, who studied in London and works in Mumbai, said it made sense to set up her business in Jaipur, known as the “Pink City” for its pink old town.
“Jaipur has a thriving ecosystem of textile and handicraft manufacturers,” he said, adding that this makes it easier to source and customize their products.
Sparks of entrepreneurship can also be seen in the younger generation taking over family businesses in small towns.
Angel investor Raunak Singhvi, who focuses on start-ups in small cities, says that instead of producing for big brands, many young second- and third-generation business owners prefer to build a brand and sell directly to customers.
He said a firm in Tirupur that engages in contract manufacturing of “western wear” for large retailers is now seeing the new generation starting out and starting its own brand.
The growth of e-commerce during the pandemic has improved small producers’ access to markets. This, combined with the rise of direct-to-consumer sales channels and social media marketing, makes brand building easier, experts say.
As these brands scale up, they often branch out from the online space and open retail spaces; This phenomenon is most common in shopping malls in Tier 2 and 3 cities like Surat and Lucknow.
Before the pandemic, local or regional brands occupied 3% of mall space. Today, they account for about 30%, and this shift is driven by expanding demand from family businesses in many small towns, said Susil Dungarwal, founder of Indian shopping mall consultancy Beyond Squarefeet.
Dungarwal stated that entrepreneurs in India’s Tier-2 and Tier-3 cities “are brave and take risks”, adding that he thinks they are “inspired by Shak Tank”.
What started as reality TV has become reality for thousands of new founders across India, as entrepreneurship is on the rise in the country’s smaller cities.
