India's Startup Evolution in Tier 2 and Tier 3 Cities: An Assessment of Government Schemes, Case Studies, and Future Directions

Abstract

India’s entrepreneurial ecosystem has expanded rapidly, positioning the country as a major global hub for start-up activity. As of 2023, over 90,000 start-ups have been registered under the Department for Promotion of Industry and Internal Trade (DPIIT). Government initiatives such as Start-up India, Digital India, MUDRA Yojana, and the Atal Innovation Mission have significantly contributed to this growth, particularly in Tier 1 cities like Bengaluru, Mumbai, Hyderabad, and Delhi-NCR. These metropolitan centers offer better access to venture capital, mentorship, digital infrastructure, and market linkages, resulting in a concentrated start-up ecosystem. In contrast, Tier 2 and Tier 3 cities—including Lucknow, Coimbatore, Surat, and Jaipur—are still developing their start-up ecosystems. Although these regions benefit from lower operational costs and a skilled labour pool, they face substantial challenges such as limited access to funding, weak incubation infrastructure, poor implementation of policy schemes, and low awareness among entrepreneurs. Socio-cultural factors such as risk aversion and fear of failure further constrain growth. This study adopts a qualitative, exploratory research design, analysing five case studies of start-ups in non-metro cities and reviewing key policy frameworks. The research aims to identify region-specific enablers and barriers and provide policy recommendations to promote inclusive and geographically balanced start-up development in India.