LEAD PICTURE
This report is from this week’s CNBC’s “Inside India” newsletter, which brings you timely, insightful news and market commentary on the emerging powerhouse. Subscribe here.
The big story
31-year-old Aarushi Kilawat is a fashion entrepreneur from India’s Jaipur, a small city with less than 5 million residents — a far cry from Indian metropolises like Mumbai, Delhi and Bengaluru.
Her brand, The Loom Art, works with over 500 artisans to make apparel from handwoven or hand-embroidered fabrics found across India’s small towns since 2018.
These clothes end up in high-end stores of Mumbai, India’s financial capital, with a population of over 20 million, and in India’s capital of Delhi, where they retail between 15,000 Indian rupees and 30,000 rupees ($170-$350). Some even find their way to stores in Spain and the U.S.
Three years ago, Kilawat branched out into jewelry, driven by a desire to expand her product line and inspired partly by pitches heard on a popular TV show, “Shark Tank India.”
“I have watched Shark Tank regularly after it launched,” she said, adding that the show helped make entrepreneurship a dinner-table topic across India. She believes her upcycled brass jewelry brand could be a good fit to make a pitch on the show.
During the pandemic, online shopping in India went into overdrive, leading to a boom in startups. In particular, 2021, the year when Shark Tank India launched, was a golden period for startups. The sector reportedly raised $42 billion then, the highest ever in a year.
As of February 2025, the government recognized 157,000 startups across India, with than 51% found in mid-sized urban centers known as Tier-2 and Tier-3 cities by 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 building brands from these smaller hubs in India, all aiming to scale beyond their local markets.
Boom in entrepreneurship
On Monday, Amazon India said that small cities were “witnessing remarkable growth” on its Amazon Global Selling platform.
Exporters from the small cities of Karur and Erode in Tamil Nadu crossed sales of $180 million in 2024, while Junagadh and Anand in Gujarat surpassed $100 million, Amazon said in the release. Haridwar and Panipat were among the other cities on the list.
“India’s wealth creation story is fast decentralizing,” said Anas Rahman Junaid, founder and chief researcher at Hurun India, a research firm. He added that while metro cities still dominate, smaller cities like Coimbatore, Surat, Indore and Lucknow are emerging as powerful engines of wealth.
One example is the direct-to-consumer skincare brand Minimalist, also based out of Jaipur, which launched via a simple Instagram post in the middle of the pandemic in 2020.
In just four years, the business rapidly grew its sales to $42 million from $3 million, according to data from market research firm Tracxn. That scale and its popularity with customers online caught the attention of Unilever’s Indian arm, which in January this year acquired Minimalist for 2,706 crore rupees, valuing it at over five times its annual revenue.
“Tier-2 and Tier-3 cities aren’t just participating in the e-commerce ecosystem. They’re powering it,” said Zaiba Sarang, co-founder of e-commerce shipping platform iThink Logistics.
“Over half of our daily deliveries now originate from Tier-2 and Tier-3 locations, with outbound volumes growing faster than ever,” she said.
Generational shift
Historically, many small cities in India have been manufacturing hubs — Agra for leather and carpets, Surat and Jaipur for textiles.
Their lower operating cost, cheaper labor and established supply networks are drawing a new generation of entrepreneurs back home.
Kilawat, who studied in London and worked in Mumbai, said setting up her business in Jaipur — known as “The Pink City” for its rosy-hued old town — made sense.
“Jaipur has a thriving ecosystem of textile and handicraft producers,” she said, adding that it makes sourcing and customizing her products easier.
Sparks of entrepreneurship are also visible in the younger generation inheriting family-run businesses in small cities.
Rather than manufacturing for big brands, many young second- and third-generation business owners are preferring to build a brand and sell to customers directly,” said Raunak Singhvi, an angel investor focused on startups in small cities.
One firm in Tirupur that does contract manufacturing of “western wear” for big retailers is now seeing its next generation strike out and launch their own brand, he said.
The growth of e-commerce during the pandemic improved access to markets for small manufacturers. This, coupled with direct-to-customer sales channels and the rise of social media marketing, has made brand building easier, say experts.
Once they scale up, these brands often break out of the online sphere to open retail spaces, with this phenomenon most visible across malls in Tier-2 and Tier-3 cities such as Surat and Lucknow.
Pre-pandemic, local or regional brands occupied up to 3% of mall space. Today, they make up nearly 30%, said Susil Dungarwal, founder of Beyond Squarefeet, a mall consultancy in India, who added that this change is due to demand from many small-town, family-owned businesses expanding.
Entrepreneurs from Tier-2 and Tier-3 cities in India “are becoming bold and taking risks”, said Dungarwal, adding that he thinks they “have been inspired by Shark Tank.”
As entrepreneurship is on the rise in the country’s smaller cities, what began as reality TV has become a reality for thousands of new founders across India.