Commerce Ministry has asked all states and Union Territories (UTs) to formulate ‘City Level Economic Vision for 100 Tier 2 and 3 Cities’ by June 2026 as a part of comprehensive ‘whole of nation’ reforms to create manufacturing hubs in 1,039 out of 7,935 towns in the country.
This initiative is part of a strategic framework prepared by Commerce Ministry’s Department of Promotion of Industry and Internal Trade (DPIIT), which was discussed during the Fourth National Conference of Chief Secretaries Fourth National Conference of Chief Secretaries on December 13-15, last year.
Tier 2 and 3 cities have been selected to take manufacturing beyond the industrial towns or Tier 1 cities, and substantially increase its contribution to the total Gross Value Added from its existing share of 17 per cent.
Pivotal to economic growth
The government considers manufacturing in Tier 2 and 3 cities pivotal to India’s economic growth. “By addressing infrastructure bottlenecks, improving land availability, enhancing logistics efficiency, creating workforce skills, and reducing compliance burden on business, a thriving manufacturing ecosystem can be created in these cities,” a note circulated for discussion and action to be taken in the national conference of Chief Secretaries said.
These 1,039 towns, among others, also offer demographic dividend, and affordable workforce, but the Centre has suggested that states with lower Gross State Domestic Product (GSDP) and manufacturing at nascent stages may prioritise capital efficiency and labour intensive industries, the note revealed.
In contrast, states with more mature manufacturing bases and higher GSDP may focus on R&D, high tech industries and innovation. This approach ensures each state leverages its unique strengths while addressing its challenges, said the note.
Timelines earmarked
Key enablers—industrial infrastructure, logistics, ease of doing business, and skilling and entrepreneurship—have been listed out and corresponding timelines earmarked for the States and UTs for the comprehensive reforms.
In the strategic framework, States and UTs have also been conveyed to develop and implement State Logistics Action Plan as per state logistics policy and LEADS assessment by June 2026, and shortlist provisions in state laws and rules to decriminalise them by next month for ease of doing business.
For scaling up industrial infrastructure in the Tier 2 and 3 cities, the Ministry of Commerce, besides seeking city level economic vision, has told states and UTs to put in place a policy for flexible land lease in industrial parks and develop 100 such plug and play parks from December 2025. Other than that, mandate usage of PM Gati Shakti National Master Plan for planning projects above a threshold monetary level and upgrade industrial skill infrastructure of 1,000 Industrial Training Institutes (ITIs).
Likewise for logistics, States have been advised to develop and implement Sate Logistics Action Plan as per state logistics policy and LEADS assessment by June 2026. Formulate City Logistics Plan of 25, Tier 2 and 3 cities by December 2026 and implement district level reforms—inspections, payment gateways, NoCs & certificates, licenses, and industrial land allotment etc—using framework of District Business Reform Action Plan.
For ease of doing business framework, the centre has suggested improvement of State’s single window system as per bench marked time, documents and steps required. This task has to be completed by December 2025. They have to undertake measures under Reducing Compliance Burden (RCB) Plus initiative for identification and reduction of compliances under 20 central acts and 3 State acts by next month, and identify provisions for comprehensive decriminalisation of various State acts, starting with municipal laws, also by next month.
For improved skilling and entrepreneurship, each State is asked to undertake skill gap studies for emerging/high potential manufacturing sectors by December, this year and support development of 100 new start-up incubation centres, and reduce vacancies of trainers by 50 per cent in ITIs by December 2029.
Government wants to increase share of manufacturing in employment from exiting 12 per cent to 22 per cent by 2047. By taking manufacturing to Tier 2 and 3 cities, the government believes that employment will get a boost. Share of manufacturing in employment has more or less remained stagnant at 12 per cent since 1972-73.