Beyond metros: How Tier-2 and Tier-3 cities could drive India’s next AI wave

Growing AI use in India is no longer limited to cities like Bengaluru, Delhi NCR, Hyderabad or Mumbai. Tier 2 and Tier 3 cities are also witnessing faster growth in AI skills, rising 20 per cent year-on-year, compared to 14 per cent in Tier 1 cities. The advancement of AI use in Tier-2 and Tier-3 cities plays a significant role in driving AI-led growth, particularly in healthcare, where access to specialists and advanced diagnostics remains uneven.

Surprisingly, India surpasses the US in terms of AI consumption, making the shift more social than technological as rural youth are increasingly driving the trend. In rural India, 55 per cent of youth already use AI almost daily, with another 28 per cent using it occasionally.

Additionally, infrastructure remains central to scaling AI beyond metros. With over 900 million internet users in India and Tier-2/3 cities driving much of the recent growth, expanding 5G rollout is enabling AI-powered applications to run affordably on cloud platforms without requiring expensive on-premises infrastructure.

Other than healthcare and regional data centres, small business owners also use AI-driven tools for inventory tracking, local customer engagement, and multilingual voice search to bridge language barriers. The agriculture and dairy sector also uses platforms like Stellapps for AI and IoT in cities like Varanasi, Indore, and Patna to monitor cattle health via wearables and optimize milk collection.

Experts indicate growth as major consumption opportunity

Industry leaders increasingly see this expansion as the next major consumption opportunity. Executives at the BW TopLine Leaders Summit 2026 pointed to manufacturing, infrastructure, digital payments, and AI-enabled sales execution as key enablers of India's next growth cycle, centred on underserved consumers beyond the largest cities.

1. As AI adoption moves beyond India’s major metros, what opportunities do Tier-2 and Tier-3 cities present for the next phase of the country’s AI-led growth?

Debjit Patra, Founder & Chairman, MediElaj: Tier-2 and Tier-3 cities represent one of the biggest opportunities for the next phase of India's AI growth because these markets are not simply smaller versions of metropolitan India. They have different needs, different consumption patterns and, in many cases, large gaps that technology can directly address. We are already seeing increasing smartphone penetration, digital payments, internet adoption and growing aspirations among consumers outside the major metros. The next step is to make advanced technology equally accessible to these consumers. AI can play a particularly important role in sectors such as healthcare, education, agriculture, financial services, logistics, retail and public services. In many of these areas, AI can help overcome limitations related to availability of skilled professionals, geographical distance and cost. For example, in healthcare, the challenge is not necessarily a lack of technology but the unequal distribution of healthcare expertise. At MediElaj, our focus has been to explore how AI-assisted healthcare and diagnostics can bring healthcare capabilities closer to people in smaller cities and underserved communities. So we see Tier-2 and Tier-3 India not merely as the next consumer market for AI, but as a place where AI can solve some of India's most fundamental access and infrastructure challenges.

Dr. Sujay Prasad, Chief Medical Director, NDPL Director, Neuberg Diagnostics: Tier 2 and Tier 3 cities are where I see the real opportunity for AI in Indian healthcare right now. These regions often lack enough specialists, and AI-enabled diagnostics and reporting can genuinely narrow that gap, bringing faster and more accurate results to patients who earlier had to travel long distances for an expert opinion. But I would frame AI here as process improvement rather than replacement. The human in the loop remains essential for interpretation, AI can sharpen and accelerate the pathway to a report, but it does not sign it. Its most immediate value is triage: reliably screening out the normals so that human scrutiny is concentrated where it matters, on the abnormals. That, in turn, makes centralisation of expertise practical. A specialist at a metro or reference centre can review the positive and equivocal cases flagged from across a network of Tier 2 and Tier 3 sites, while the routine workload is cleared locally and quickly. Across the industry, automated reporting and remote diagnostics are already extending quality healthcare access beyond the metros. The next phase of India's AI-led growth will not be led by the cities with the most infrastructure, but by those solving the most real problems.

2. As AI becomes increasingly central to global competitiveness and geopolitics, how can India build technology ecosystems that address local needs while remaining globally competitive?

Debjit Patra, Founder & Chairman, MediElaj: India has a unique advantage because we have both a very large domestic market and a strong technology talent base. The opportunity is to use the domestic market as a real-world laboratory for solving complex, large-scale problems, and then take those solutions globally. The key is not to simply replicate technology developed elsewhere. We need to build AI systems that understand India's languages, demographics, economic realities, infrastructure limitations and sector-specific requirements. At the same time, Indian technology companies must maintain global standards in areas such as reliability, cybersecurity, data protection, responsible AI and regulatory compliance. We believe the strongest Indian AI companies will be those that solve a distinctly Indian problem but build the underlying technology to a global standard. Healthcare is a good example. If we can develop an affordable and scalable model for delivering AI-assisted healthcare across India's diverse geography, that model could potentially have relevance in Africa, Southeast Asia, the Middle East and other emerging markets facing similar healthcare-access challenges. India's opportunity is therefore to move from being primarily a consumer of global technology to becoming a creator of technology models that can serve the Global South and compete internationally.

Dr. Sujay Prasad, Chief Medical Director, NDPL Director, Neuberg Diagnostics: India's biggest strength in healthcare AI is scale, the sheer diversity of patients, conditions and settings gives us data and context that most countries simply do not have. To stay globally competitive, we need to build solutions rooted in Indian realities, affordable, accurate for our population and adaptable to varying infrastructure, rather than importing models built for very different healthcare systems. At the same time, these solutions must meet global standards of validation and safety. If we get that balance right, India will not just adopt AI in healthcare, it will help define how the world builds it responsibly.

3. What are the key factors that will determine how successfully AI-driven solutions can scale across India’s smaller cities and reach a wider consumer base?

Debjit Patra, Founder & Chairman, MediElaj: AI adoption will ultimately depend on much more than the quality of the underlying model. There are at least five important factors. First is affordability. Technology has to create enough value to justify its cost for consumers and institutions in smaller markets. Second is simplicity. AI solutions need to work for people with varying levels of digital literacy. The best technology is often the technology that the user does not need to understand technically. Third is trust. Consumers need confidence that AI systems are reliable, transparent and protecting their data. This becomes even more important in sensitive sectors such as healthcare and finance. Fourth is infrastructure. Connectivity, devices, cloud infrastructure, local service networks and trained people all have to work together. And finally, localization is critical. India's smaller cities are linguistically and culturally diverse. AI solutions need to understand local languages, workflows and real-world conditions rather than assuming that a metropolitan user experience will work everywhere. In our own experience at MediElaj, we have learned that scaling healthcare AI is not just about building an intelligent system. It requires combining AI with diagnostics, physical infrastructure, healthcare professionals, regulatory frameworks and an economically sustainable delivery model.

Dr. Sujay Prasad, Chief Medical Director, NDPL Director, Neuberg Diagnostics: A few factors will decide this. First, affordability solutions need pricing models that work for smaller cities, not just metros. Second, trust, patients and even clinicians need to see consistent, explainable results before they rely on AI for something as personal as their health. And finally, local language and context matter, a tool that understands regional needs will always scale faster than one that simply gets translated. Get these right, and adoption will follow naturally.

4. What is the larger vision behind expanding access to AI-driven technology beyond India’s major metros, and how do you see this shaping the way consumers interact with emerging technologies?

Debjit Patra, Founder & Chairman, MediElaj: The larger vision is to make advanced technology geography-neutral. Historically, new technologies often reach major cities first because that is where purchasing power, infrastructure and skilled professionals are concentrated. AI gives us an opportunity to change that pattern because much of its value can be delivered digitally. But the next stage will be even more interesting. Consumers will not necessarily think of AI as a separate technology. They will simply interact with services that are AI-enabled in the background. A farmer may use an application that helps interpret crop conditions. A student may have an AI-based learning assistant. A patient may receive an initial health assessment before reaching a doctor. A small business owner may use AI for accounting, customer service or inventory management. In other words, AI will increasingly become an invisible layer within everyday services. Our vision at MediElaj follows the same principle. We don't want people to use technology simply because it is AI. We want them to experience better healthcare access because AI is making the healthcare system more capable and accessible. That shift—from technology as a product to technology as an embedded service—is going to be one of the biggest changes in the coming decade.

Dr. Sujay Prasad, Chief Medical Director, NDPL Director, Neuberg Diagnostics: The larger vision is simple: good healthcare should not depend on where you live. For decades, quality healthcare and expert opinions were concentrated in a handful of big cities, leaving a large part of the country underserved. AI driven tools can change that by bringing consistent, reliable results to smaller towns without needing a specialist physically present everywhere. Over time, this will also change consumer behavior; people will start expecting faster answers, more transparency and greater involvement in their own health decisions, rather than treating healthcare as something that only happens in a hospital far away.

5. As AI adoption continues to expand across India, what larger business opportunity do you see emerging—from creating more accessible technology ecosystems to building entirely new technology-enabled service models?

Debjit Patra, Founder & Chairman, MediElaj: We believe the biggest opportunity is not necessarily in selling AI software. It is in using AI to reimagine how services are delivered. AI can fundamentally change the economics of many industries by reducing the cost of expertise, automating repetitive processes, improving decision-making and allowing services to be delivered closer to the consumer. This creates opportunities for entirely new business models. Healthcare is a strong example. Instead of asking people to travel to a large hospital for every requirement, technology can enable a distributed model involving digital platforms, AI-assisted assessment, diagnostic devices, healthcare kiosks, primary healthcare centres and remote healthcare professionals. The same principle can apply to education, agriculture, financial services, legal services and many other sectors. This is where we see India's next major AI opportunity: not just building AI applications, but building AI-enabled service infrastructure. The companies that can successfully combine AI with physical infrastructure, domain expertise, human professionals and sustainable economics could create entirely new categories of businesses.

For India, that could be particularly transformative because we are a country of enormous scale and diversity. If technology can make high-quality services accessible at a much lower cost, the addressable market expands dramatically. Ultimately, we believe the next phase of India's AI story will be about democratisation, taking capabilities that were previously expensive, centralised, or available only to a limited population and making them accessible to hundreds of millions of people. That is also the larger philosophy behind MediElaj: use technology not merely to make existing healthcare processes digital, but to rethink how healthcare can reach people in the first place.

Dr. Sujay Prasad, Chief Medical Director, NDPL Director, Neuberg Diagnostics: The real opportunity lies not only in making existing services faster, but also in creating new, access-focused models. AI-enabled diagnostic and health-monitoring services can reach smaller cities and homes while remaining under the supervision of qualified professionals. This creates opportunities for partnerships among technology companies, healthcare providers, and local entrepreneurs with strong regional knowledge. In the coming years, the greatest business gains will likely go to organisations that make accessibility central to their offering, building trust and extending their reach to communities underserved by traditional healthcare.