Context
The Hon’ble Finance Minister, during Union Budget 2025-26, announced that “A national framework will be formulated as guidance to states for promoting Global Capability Centres in emerging tier 2 cities. This will suggest measures for enhancing availability of talent and infrastructure, building byelaw reforms, and mechanisms for collaboration with industry.”
Current scenario
In the past, Global Capability Centers (GCCs) were mainly set up in India to handle legacy work and/or back office for global operations. However, in the recent times, many GCCs are focusing on end-to-end product ownership, right from the time they enter the Indian market. In addition, the GCCs are increasingly delivering cutting edge work (product R&D, big data, AI, automation, etc.) and some of them are operating at a significant scale.
As per the Nasscom- Zinnov report on “India GCC Landscape – The 5-year journey” published in September 2024, India is home to more than 1,700 GCCs across various verticals such as automotive, aerospace and defence, manufacturing, medical devices etc, and specialising in Information Technology (IT), Business Process Management (BPM), and Engineering Research and Design (ER&D) services. They collectively contribute to a substantial USD 64.6 billion in revenues and directly employ more than 1.9 million people.
Issues and challenges
GCCs have a significant potential for growth in India, with projections indicating the market could reach a size of around $ 99-105 billion by 2030, making India a leading global hub for GCCs due to its large talent pool, favorable business environment, and strong technological infrastructure.
However, the current concentration of GCC operations presents both challenges and opportunities. While tier-I cities, particularly Bengaluru, Delhi NCR, Hyderabad, Pune, and Mumbai, have historically dominated the landscape—hosting approximately 90% of the installed talent base—these metropolitan centers are increasingly facing resource constraints, including talent saturation, rising operational costs, and infrastructure pressures. This has catalyzed a strategic shift among both Indian IT-ITeS companies and multinational corporations to explore and establish operations in emerging urban centers. These tier-II cities offer compelling advantages: access to untapped talent pools, lower operational costs, reduced attrition rates, and often superior quality of life for employees. The geographical diversification of GCC operations beyond traditional hubs is not just a necessity driven by tier-I market saturation but also represents a strategic opportunity to create a more balanced and sustainable GCC ecosystem across India. This expansion is gradually reshaping India's GCC landscape, creating new centers of excellence that can support the sector's ambitious growth trajectory while contributing to more equitable regional development.
Another important factor that is hindering the growth of GCCs in India is the safe harbour regime under Indian transfer pricing laws. The GCCs, being related parties to their global entities, are governed by Indian and international transfer pricing regulations for arriving at the profit margins on which taxes are applicable. The design of the transfer pricing mechanism and its implementation can significantly impact the investment decisions of a multinational enterprise in relation to its GCCs strategy across various jurisdictions. Achieving transfer pricing parity with some of the margin optimised countries and fostering an environment conducive to the creation of significant knowledge-based employment in the export of services can significantly strengthen India’s position as an attractive and competitive choice for GCCs, specifically ER&D GCCs. Safe Harbour rules enable pre-set rates of profit margins to be to be “accepted” by the revenue authorities. Designed well, these can enable ease of doing business and highlight India as a tax competitive jurisdiction from a transfer pricing perspective.
Current initiatives and outcomes
The Indian government has implemented several strategic initiatives to strengthen the country's position as a preferred destination for GCCs.
- World-class Tech Parks- Government has ensured that cities like Bengaluru, Hyderabad, and Noida offer modern tech hubs.
- Improved Connectivity-Enhanced Road, air, and digital infrastructure to support global business needs in Tier I cities has attracted GCCs.
- Remote Work Readiness- A strong IT backbone supports remote and hybrid work models effectively.
- Supportive Policies - Several states, including Karnataka, Telangana, and Uttar Pradesh, offer GCC friendly policies with tax incentives, subsidies, and single-window clearances. States IT and Global Capability Center (GCC) policies also reflect a need to incentivise corporate investment in these emerging urban centers.
- Digital Transformation - India is rapidly advancing in digital infrastructure, with initiatives like Digital India driving connectivity and innovation.
A report by Inductus GCC in September 2024, highlights the increasing establishment of GCCs by multinational corporations (MNCs) in tier II cities such as Pune, Coimbatore, and Jaipur.
Strategies to operationalise the budget announcement
- Vision
- Position India as a premier GCC destination
- Create a compelling GCC ecosystem that draws sustained global and local investment
- Establish knowledge hubs that attract global talent and investment
- Foster economic growth through high-value service exports
- Enable development of hubs to cater to GCCs
This classification would evaluate each location's current capacity and readiness to attract GCCs, categorising them into three distinct tiers:
- Primary Hubs (Level 0): These are established technology centres like Bangalore, Mumbai, Pune, Hyderabad, Chennai and Delhi/ NCR. The key support these hubs require are:
- Ease of doing business, simplifying compliances and labour laws
- Local infrastructure development
- Explore redistributing future growth to cities close to existing GCC hubs
- Developing Hubs (Level 1): These are regions that have demonstrated initial success in attracting IT-ITeS companies and show promising growth trajectories. For example, Coimbatore, Ahmedabad, Indore, Kochi and Jaipur. Focus:
- Marketing/ Branding
- Improve talent availability, boost local tech ecosystem
- Infrastructure development
- Attract Grade A Office Space Development
The objective should be to achieve significant outcomes over 3-5 years.
- Potential Destinations (Level 2): These are regions with minimal GCC presence but potential for growth. For example, Nagpur, Nashik, Bhopal, Lucknow. Focus:
- Talent and Skill Development: attract IT-ITES companies and Startups to set up base / expand to create the needed tech ecosystem and
- Sector emphasis
- Infrastructure development
- Ease of Doing Business
- Study: Study existing regulations applicable to the GCCs to identify and eliminate outdated or redundant requirements with an objective to ensure that regulations are made applicable to the GCCs with an understanding of their unique context, operational models and requirements. The study should cover corporate laws, taxation, labour and local state level laws, amongst others. The study should be carried out in a defined timeframe and its recommendations should be implemented in a time bound manner.
- Centre State Collaboration: Develop a structure and processes for the Centre and States to collaborate with the industry on policy priorities and suggestions, to ensure that the policy suggestions are validated prior to being implemented.
- State level Facilitation: Ensure coordination with-in different arms of the Government and resolution of Industry concerns
- Infrastructure development
- Telecom, Power, Transportation: High quality road connectivity between key urban centres, public transportation, water supply, high speed internet, uninterrupted power supply, ability to meet ESG goals.
- Grade A Office Space: Provide targeted policy support and incentives and attract real estate developers to build A grade office space.
- Ease of Living: Attract quality educational institutions, health facilities, entertainment facilities etc.
- International connectivity: Good flight connectivity to key GCC head quarter locations in US, EU.
- Talent and Skill Development
- Attract IT-ITES companies and Startups to set up base / expand.
- Facilitate GCC partnership with universities to set up labs, invest in education and training programmes, develop industry-relevant modules, curriculum, apprenticeship programmes etc.
- Incentives and Support
- IFSC GIFT City model: Analyse and draw valuable insights from the successful IFSC GIFT City model, particularly in designing incentive structures and creating specialized ecosystems for other sectors or in a sector agnostic formulation.
- Marketing and Branding
- Market the Developing hub locations to the GCCs already in India as well as the GCCs which are looking to expand globally and do not have a presence in India yet.
- Promote successful case studies of GCCs operating in Tier 2 cities through global platforms to enhance visibility.
- Develop campaigns aimed at attracting untapped markets, particularly in Europe and Asia-Pacific regions.
