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)

Answer

Approach:IntroductionDefine Tier-2 cities with some examples.BodyLink the tier-2 cities and the culture of consumption by linking it with factors that aid consumption and demand among the middle class.Discuss how it has led to the rise of a new middle class.ConclusionConclude using broad points which focus on the areas where the middle class spends and how it boosts the growth of Tier-2 cities.

Introduction

As per the government, Tier 2 cities are theupcoming cities having a population size ranging between 50,000 and 1,00,000.They include the cities of Ahmedabad, Vadodara, Coimbatore, Jaipur, Pune, Varanasi etc.

These are cities that are experiencing growth at rates much faster than Tier-1 cities and the rise of a new middle class.

Body

Relationship between New Middle Class and Tier 2 Cities:

• Rise of white-collar jobs:The service sector accounts for more than 64% of jobs in tier 2 and tier 3 cities as a result of globalization and LPG reforms in India. It led to an increase in employment opportunities along with higher salaries creating a new middle class with more disposable income.


• Increased entrepreneurial activity: Majority of the Tier-2 Cities like Jaipur, Surat, Indore, Calicut, etc have attractedhuge investments and are start-up hubs. This leads tomore employmentopportunities and also more innovation in the market which helps spur demand.


• Social media and exposure to western consumerism:Proliferation of Internet and increased exposure to social media has led to rising aspirations. This has boosted consumer demand across sectors. Theavailability and affordability of e-commercehas made it easier for the middle class to fulfill these aspirations.


• Better than Tier-1 cities:Themoderate cost of livingin Tier 2 cities encourages greater consumption because of the affordability of a better lifestyle. The Tier-2 cities also havegreater ease of livingwhich is reflected in the Ease of Living Index.Five of the top 10 cities in the Ease of Living (EOL) index are Tier-2 cities, namely Ahmedabad, Surat, Coimbatore, Vadodara, and Indore and Tier-2 cities typically have10% – 35% lower cost of livingas compared to the nearest Tier-1 location


• Five of the top 10 cities in the Ease of Living (EOL) index are Tier-2 cities, namely Ahmedabad, Surat, Coimbatore, Vadodara, and Indore and Tier-2 cities typically have10% – 35% lower cost of livingas compared to the nearest Tier-1 location


• Infrastructure development: Enhanced connectivity, attractive real estate prices, better amenities, less crowded, etc. and a focus on improving the quality of infrastructure attracts the middle class and investors. This leads to further boom in the tier-2 economy.


• New market: The capacity to consume along with the availability of all major consumer brands has led to Tier-2 cities to be established as the new market. The tourism footfall has also increased in these cities leading to increased focus on providing quality amenities and hospitality. These further boosts middle class aspirations and thereby the growth of Tier-2 cities.


• Government Initiativeslike Make in India, Stand-up India, Start-up India, MUDRA Yojana, JAM Trinity, UDAN, etc. in tier 2 cities have brought more people into the fold of the middle class by increasing disposable income and providing them with avenues to spend.

Conclusion

Increased wages, the digital revolution, and the westernization of habits along with improvement in infrastructure, business ecosystem, and enhanced connectivity have together contributed to the promotion of consumption culture in the middle class. The virtuous cycle of economy observed in Tier-2 cities is fuelled by the middle class and its aspiration to consume better.