45% of startups in India originate from Tier II and III cities: KPMG report

KPMG in India launched its report Democratisation of Entrepreneurship in India at the TiE Global Summit at Bangalore, which highlighted that 45% of the country’s startups originate from Tier II and III cities.

“As entrepreneurship spreads to Tier II and III cities, it generates local jobs, prevents the need for young people to migrate for work and helps retain talent within communities,” the report stated.

Karnataka stands among the top five states/union territories with the most direct jobs from DPIIT-recognised startups in 2023, ranking fourth below Maharashtra, Gujarat and Delhi, the report found.

The report also noted that as of mid-2024, 31 states and union territories have their own dedicated startup policies, offering various support mechanisms for entrepreneurs. This has in turn contributed to the evolution of the entrepreneurial ecosystem in the nation, it added.

“The democratisation of entrepreneurship in India is not just a trend but a powerful movement towards inclusive and sustainable economic growth. Our report showcases the significant strides made by various stakeholders, including the government, private sector, and grassroots innovators, in creating a conducive environment for entrepreneurship. By fostering a diverse and inclusive entrepreneurial ecosystem, we are paving the way for a more resilient and innovative economy,” said Supreet Sachdev, Office Managing Partner – Bengaluru, KPMG in India.

The report identified government initiatives like Startup India and the Atal Innovation Mission as key drivers, which provide essential funding, mentorship, and infrastructure tailored to local needs. The rise of digital technologies and platforms has facilitated broader market access for startups, enabling them to thrive even in Tier II and III cities.

73.5% of working women in rural areas and 42.3% in urban areas between the ages of 15 and 59 were self-employed and actively contributed to driving economic growth, the report highlighted.

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Additionally, 20.5% of all MSMEs in India were found to be owned by women entrepreneurs.

“Entrepreneurship in India is undergoing a paradigm shift, evolving into a more accessible and inclusive force for economic growth. Inclusivity is a vital aspect of democratising entrepreneurship, and we believe women entrepreneurs represent a significant yet often overlooked segment of the workforce. As we look ahead, the solid foundation being laid through communities like TiE, government initiatives, technological advancements, and private sector collaborations – has the potential to redefine India’s global standing as an innovation hub,” said Akhilesh Tuteja, Partner and Head, Clients and Markets. KPMG in India.

It listed the monopoly of tech companies, bridging the digital divide, funding disparities, cultural barriers, and intellectual property concerns as limitations that are being addressed via government initiatives.

Exploring the entrepreneurial landscape in the US, China and others, the report drew on lessons such as building collaborative ecosystems, leveraging technology for market access, enhancing access to capital, and domestic R&D.