Global Capability Centers in India: Opportunities and Prospects

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Global Capability Centers (GCC) have become an important strategic hub for global companies in India. Union Finance Minister Nirmala Sitharaman recently announced that the GCC sector in India currently employs 21.6 lakh professionals and this number is expected to reach 28 lakh by the year 2030.

What are Global Capability Centers (GCC)

• These are centers set up by global companies that provide strategic and technical support for product development, research and development (R&D), data analytics and other high-value functions.
• These centers leverage a cost-effective and skilled workforce, allowing companies to remain globally competitive.
• GCCs in India are primarily focused on IT, engineering and financial services.

Key Features

• High-value functions: GCCs are not limited to service delivery and handle complex business functions such as research, innovation and strategic leadership.
• Cost-effective: Workforce costs in GCCs in India are 30-50% lower than in the US, UK and Australia.
• Talent pool: India provides 28% of the global science, technology, engineering and mathematics (STEM) workforce and 23% of software engineering talent.
• Female participation: GCC workforce has a 35% female participation and 42.7% of STEM graduates in India are women.
• Rapid growth: Over the past five years, the rate of establishment of engineering R&D GCCs has been 1.3 times faster than the overall GCC.

GCC Ecosystem in India

• Employment: Currently 2.16 million professionals are employed in GCC, which is expected to reach 2.8 million by 2030, registering a Compound Annual Growth Rate (CAGR) of 11%.
• Economic Contribution: The GCC sector contributes a direct GVA of $68 billion (1.6% of national GDP) which could reach $150-200 billion by 2030.
• Establishment Rate: On an average, one new GCC is established per week in 2024 and the same trend is expected in 2025.
• Global Talent: 32% of global GCC talent is located in India making it a hub of global innovation.
• Key Regions: Bengaluru, Hyderabad, Pune and Delhi-NCR are the major GCC hubs in India.
• Competitive Advantage: Cost-effective and skilled workforce makes India attractive for global companies.

Government initiatives

• Educational infrastructure: 7 new IITs and 16 new IIITs were established in the last decade, increasing the STEM talent pool.
• Policy support: The government is providing incentives and facilities for GCC establishment, such as tax benefits and infrastructure support.
• Skill development: Promotion of in-house training programs promotes global-ready leadership.
• Digital India: Improvements in digital infrastructure and connectivity have created a favorable environment for GCC.
• Attractive policies: The government has committed to encourage GCC to set up base in India.

Challenges

• Skill gap: Lack of high-level skills in complex and emerging areas, such as AI, machine learning and data science.
• Infrastructure: Pressure on infrastructure in urban centers, such as transport and power supply, may impact GCC expansion.
• Competition: Singapore, the Philippines and other countries are also becoming attractive destinations for GCC.
• Regulatory complexities: Complex rules related to taxation, data privacy, and intellectual property rights.
• Employee retention: Retaining and attracting talent is a challenge due to high demand.

Way forward

• Skill development: Promote training programs in emerging technologies, especially in AI, blockchain, and cybersecurity.
• Infrastructure upgradation: Ensure world-class infrastructure, such as smart cities and better connectivity, for GCC hubs.
• Policy reforms: Implement simpler tax policies and data privacy regulations to attract investments.
• Regional expansion: Promote GCC in tier-2 cities such as Jaipur, Coimbatore, and Chandigarh in addition to major cities such as Bengaluru and Hyderabad.
• Women participation: Launch more scholarships and training programs for women in STEM.
• Global partnerships: Make India a global hub for innovation and R&D by increasing partnerships with global companies.