Trunk Economics | October 1, 2024Here we come, GCCs are saying as states lay down the red carpet
The next phase of GCC growth centres will come from Tier-II cities as they are increasingly evaluating tier-II towns to expand their operations. This move towards Tier-II cities is driven, primarily by the same reason why MNCs set up GCCs in India: cost arbitrage and relatively easy availability of talent pool.
On September 27, the Karnataka government became the first state in the country to come up with a dedicated global capability centre (GCC) GCC policy to attract higher investment in the booming IT sector. The government will establish three new technology parks or Global Innovation District, in Bengaluru and two clusters outside the state capital. Plans are afoot to create 3.5 lakh jobs by 2029.
For the unversed, a GCC is an offshore unit set up by a company in a foreign country to in-source IT and other related business functions.
Incidentally, it all began about 40 years ago, in Karnataka itself, when Texas Instruments set up a small offshore office in Bengaluru in 1985. India has come a long way since to turn itself into the world’s GCC capital.
In 2012, about 760 GCCs were operating out of India. In 2016, that number went over 1000, and as of March 2023, India houses over 1,600 GCCs. According to a PwC report, by 2028, the country is poised to have 2100 GCCs, with the market size of the centres touching USD 90 billion.
As per a study by Wizmatic, GCCs presently employ 32 lakh people, primarily engineers and scientists. They generated a combined revenue of USD 46 billion in 2023 and are estimated to generate a total revenue of USD 121 billion by 2030, roughly 3.5 per cent of India’s GDP. Out of this, USD 102 billion will represent export earnings.
To be sure, the timeline map of GCCs in India reflects a rising value chain too, broadly mirroring the country’s emergence as a services sector powerhouse. While populous neighbour China, with whom India has fought full-fledged mountain wars and enjoys a somewhat frosty geo-strategic relationship, turned itself into the world’s factory, India has quietly, but surely, ratcheted up its position in the global service’s exports sweepstakes.
As per a NASSCOM report, GCCs are leveraging India’s vital engineering research and development service provider community, its mature start-ups, and its peer-GCC ecosystem. They have established more than 15 incubators, over 40 accelerators, and multiple partner programmes to drive collaboration with Indian start-ups.
The next phase of GCC growth centres will come from Tier-II cities as they are increasingly evaluating tier-II towns to expand their operations. This move towards Tier-II cities is driven, primarily by the same reason why MNCs set up GCCs in India: cost arbitrage and relatively easy availability of talent pool.
The recent thrust on infrastructure development in these cities has also added to their appeal. As per a CBRE research report, during H1 of 2023, about 22 percent of GCC centres were set up in tier-II cities, driven by the availability of existing and fresh talent.
For all you know, we could well see other states too laying down the red carpet to GCCs.
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On September 27, the Karnataka government became the first state in the country to come up with a dedicated global capability centre (GCC) GCC policy to attract higher investment in the booming IT sector. The government will establish three new technology parks or Global Innovation District, in Bengaluru and two clusters outside the state capital. Plans are afoot to create 3.5 lakh jobs by 2029.
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