Mumbai: Small cities are emerging as major talent hubs, with a majority of employers witnessing a significant increase in hiring from tier II and III locations in the last two years, according to a report.

India's hiring landscape is increasingly moving beyond traditional metropolitan centres, as 69 per cent of organisations reported increasing hiring from tier II and III cities by more than 30 per cent over the last two years, said the report by workforce staffing and HR solutions Genius HRTech Limited.

The report is based on inputs from 1,729 employers through a survey in August across sectors, including finance and BFSI, FMCG, engineering, information technology, manufacturing, telecom, and retail and e-commerce amongst others.

The findings point to a growing shift towards smaller cities as organisations expand their talent pools and adopt more distributed hiring strategies.

This trend is expected to accelerate, with 55 per cent of respondents expecting the majority of their organisations' hiring to shift towards tier II and III cities over the next three years.

At the same time, despite the significant talent opportunity, infrastructure and connectivity remain key constraints, with 60 per cent of respondents identifying them as the biggest challenge to expanding hiring beyond metro cities.

The report also said that confidence in the talent available across smaller cities is strengthening as 64 per cent of respondents believe tier II and III cities already have an industry-ready talent pool across most functions, indicating that these markets are increasingly capable of supporting mainstream workforce requirements.

The report also found that cost efficiency is one of the biggest advantage of hiring from tier II and III cities, with 39 per cent of respondents identifying it as the primary benefit.

This is followed by stronger employee loyalty at 26 per cent and lower employee attrition at 22 per cent, while 13 per cent see access to untapped talent as the key advantage, it said.

According to the report, the manufacturing sector is emerging as one of the biggest beneficiaries of this shift.

Around 37 per cent of respondents expect manufacturing and engineering to drive the highest hiring demand in tier II and III cities over the next two to three years, highlighting the growing role of smaller cities in India's industrial and employment expansion.

"Tier II and III cities are no longer being viewed simply as alternatives to metros; they are increasingly becoming strategic talent markets in their own right. With a significant majority of organisations already increasing hiring from these locations and more than half expecting this trend to become the dominant hiring model over the next three years, the opportunity is clearly moving from cost arbitrage to long-term workforce strategy. The next priority will be strengthening infrastructure and building specialised skills to support this growth," Genius HRTech chairman R P Yadav added.