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The ratio of urban area contribution to India’s GDP over the next decade.

Indias’s Tier 1 cities such as Mumbai, Bengaluru, Chennai, or Delhi are well known and remain key drivers of India’s economic growth. However, a number of emerging tier 2 and 3 cities confirm that India’s economy is entering a more diversified and integrated growth phase supported by cross-regional infrastructure developments and incentive schemes, focused on a new phase of urbanisation.

India’s recently published Economic Survey 2025-2026 put one important topic on the agenda: Urbanisation. With a growing population in cities, urban areas and an idea of India’s future cities are becoming increasingly important.

Urban areas contribute a major share to India’s economic output, and are expected to reach a share of 70% of India’s GDP over the next decade. This requires cities to be designed and developed sustainably to cater for both, growth and well-being. The Economic Survey argued this to require three focus areas for future urban development:

Those factors can be defined by time: time required to commute from A to B, time to asses services, or else. In global urban design and real estate, this has led to concepts such as “the 15 minute city”, a design principle in which residents can assess essentials such as work, food, health, education, and culture within a 15-minute walk or bike ride from their home, basically leading to mixed-use developments and a more pro-active and sustainable design environment.

In a landmark policy shift, the Indian government launched the INR 1 lakh crore (around EUR 9.3 billion) Urban Challenge Fund (UCF). This initiative moves away from traditional, unconditional grants toward a competitive, reform-linked framework.

To access the UCF, cities must demonstrate bankability by focusing on:

A key feature is financial discipline. Central assistance is capped at 25%, requiring municipalities to raise at least 50% of investment through market-linked financing, such as municipal bonds. To ensure smaller cities aren't left behind, an INR 5,000-crore credit guarantee scheme supports resource-constrained hubs, reframing urbanization as a private-sector-inclusive investment opportunity rather than a fiscal burden.

Tier 2 and 3 cities start picking up on this development, being at the forefront of a corridor based development. According to JLL, some of the factors contributing to this development are:

Urban and regional infrastructure remains a key public investment focus, supporting decentralisation and reducing talent migration for more broader ecosystem developments. Nearly 50% of recognised startups are for example based in Tier 2 and 3 cities today.

For European investors and businesses, this development offers a unique entry point. While Tier 1 cities are often saturated and high-cost, Tier 2 and 3 hubs represent opportunities for Green City technologies, sustainable transport, and smart infrastructure, areas where European expertise excels. As India decentralises, the Indo-European partnership can move into these emerging growth hubs, fostering a bilateral exchange of innovation in urban resilience and sustainable industrialisation.

Sources: The Economic Times, JLL, Indian Express

Dräger, a Germany-based and publicly listed, family-run enterprise, is a leading manufacturer of medical and safety technology products with a significant presence across R&D and manufacturing in India. In order to enhance clinical education as well as support skill development, the company has entered a Memorandum of Understanding with India’s Breach Candy Hospital, bringing the Dräger Medical Academy to Mumbai.

The MoU provides Breach Candy Hospital access to Dräger’s Medical Academy, a clinical learning ecosystem focused on critical skill development. The platform offers tailored learning modules for professionals across the healthcare spectrum, from doctors to nurses and biomedical engineers, with a focus on three key areas:

This partnership reflects Dräger's broader strategy to deepen its footprint in India's healthcare sector, addressing the country's growing demand for scalable, technology-driven clinical training solutions. For German and European businesses, it serves as a tangible example of how specialised expertise in medical technology and education can translate into strategic partnerships in high-growth emerging markets, reinforcing India as a key destination for knowledge-driven expansion beyond traditional manufacturing and trade.

Sources: Dräger, The Economic Times

German machine manufacturer INDEX has opened an integrated technology centre in Bengaluru to support its clients with tailored solutions. Having operated a sales and service function in India for over 25 years, the company is now leveraging its established position in the country's growing manufacturing sector through this new facility.

India's manufacturing sector is expanding rapidly. Just last week, I highlighted a recent wave of first openings from leading manufacturers across sectors and geographies, and INDEX fits into that trend. As a global leader in CNC machines, the company provides metal-cutting machinery alongside application consulting, automation solutions, and process optimisation services. Its new Bengaluru centre will offer integrated consulting, testing, and technical support, bringing those capabilities closer to Indian clients.

Looking further ahead, INDEX is actively evaluating the possibility of opening its own manufacturing site in India within the next three years, underscoring the strategic weight the company places on the market. This is also a trajectory I’ve been discussing more broadly with senior leaders, as entering or expanding in the market via a technology centre is an asset-light solution and allows for faster iterations, well in line with India’s speed of development.

For European companies still treating India as a peripheral market or a back-office location, the window to define a strategic position on their own terms is narrowing. The talent is there, the infrastructure is improving, and competitors are already moving. Our just announced new India Rising Perspective by Zinnov (see today’s spotlight) on “Engineering Europe’s Future with India” will provide comprehensive insights as to why a growing number of European businesses of all sizes such as INDEX, or last week’s announcement of Festo, choose this path.

Sources: Deccan Herald

GCCs. AI Centers of Excellence. How is the capability corridor in Tech between Europe and India being built? And what does it mean for Europe’s future?

The second India Rising Perspective series, "Engineering Europe’s Future with India”, is an exclusive collaboration with Zinnov, a leading management consulting firm with core expertise in globalization, digital engineering, and digital transformation strategy, supporting Fortune 500, mid-size, and PE-backed companies since 2002.

The firm has helped setting up over 200 Global Capability Centers and is a trusted partner to an exceptional list of clients globally including from Germany and Europe.

The first issue will be released this week and find all details here.

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