India is fast becoming a global hub for Global Capability Centers (GCCs), specialized operational centers established by multinational companies to centralize and optimize business processes. These centers, initially focused on cost-driven back-office operations, have evolved into strategic units fostering innovation, research and high value-added capabilities. Realizing their importance, the Government of India is formulating a new overall policy to attract more GCCs, particularly in Tier 2 and Tier 3 cities, to ensure widespread economic benefits.

A new GCC policy from Meity in preparation

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The Ministry of Electronics and Information Technology (MeitY) is working on a comprehensive policy framework aimed at providing new incentives to Gulf countries. These incentives are intended to complement existing state-level policies and encourage CCGs to expand into smaller cities. The emphasis is on creating dedicated office areas in areas where space constraints might otherwise limit large-scale operations. In such cases, the central government is considering incentives to create smaller CCGs dedicated to niche areas like healthcare and finance.

Additionally, according to officials speaking to the media, the GCC policy will emphasize long-term talent development in pioneering areas such as generative artificial intelligence (AI), healthcare and technology. financial intelligence. This approach marks a shift from short-term tax incentives to sustainable strategies that align with India’s broader goals for technological advancement and workforce development.

The role of state governments

Several Indian states are proactively designing GCC-specific policies to attract investments. For example:

• Karnataka: The State became the first to launch a policy dedicated to the GCC, by deploying a draft in September 2024 before the final version is released in November. THE Karnataka GCC Policy: 2024-2029 aims to attract 500 new GCC countries over the next five years, creating 350,000 jobs and generating economic output of US$50 billion. Incentives include rent reimbursement, funding for innovation labs and reimbursement of training costs.
• Uttar Pradesh: The State GCC Policy 2024 targets more than 1,000 GCC countries and 500,000 jobs, offering tax incentives such as 100 percent stamp duty exemptions and wage subsidies.
• Maharashtra: Known for its robust data connectivity and reliable infrastructure, Maharashtra is actively engaging with stakeholders to develop its own GCC policy, focusing on investments in technology parks and special economic zones.

These state-specific policies, combined with the central government’s overall framework, aim to position India as a top choice for global companies seeking to establish GCCs.

India’s growth trajectory in the GCC

The Indian GCC market is on an impressive growth trajectory. According to industry body Nasscom, the GCC market size is expected to reach $100 billion by 2030, employing more than 2.5 million professionals. As of FY2024, CCGs in India have generated revenues of US$64.6 billion, employing nearly 2 million people.

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During the period from Q1 2023 to Q4 2024, 124 new companies signed deals in the GCC, acquiring office space for new capabilities or R&D centers. Notably, small and medium-sized businesses accounted for a significant portion of these deals, with 55 of the 124 companies reporting annual revenues of less than US$1 billion.

CCGs have also become multifunctional entities. Nearly 90% of national CCGs manage various functions, including technology, operations and product engineering. Furthermore, according to a November 2024 report from consulting firm InductusEngineering-focused CCGs grew 1.3 times faster than the general CCG growth rate, indicating a clear shift towards high value-added activities.

India’s efforts to improve its GCC ecosystem reflect its strategic vision to drive economic growth and innovation. The new general policy, combined with initiatives at the state level, aims to create an environment conducive to the development of the Gulf countries. As the sector evolves, India’s focus on technology, talent and infrastructure will ensure sustainable competitive advantage, making it a preferred destination for global capability hubs.

Technological transformation

The integration of advanced technologies is a defining feature of India’s evolution in the GCC. By 2026, more than 70% of Gulf countries in India are expected to integrate AI capabilities, including machine learning for operational analysis, AI-based customer support and cybersecurity training. This technology focus underscores India’s growing role as a hub for innovation and digital transformation.

Expansion beyond Tier 1 cities

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As major cities like Bengaluru, Hyderabad, Mumbai and Delhi NCR continue to dominate the GCC landscape, the focus is increasingly shifting to Tier 2 and Tier 3 cities. Locations such as Jaipur, Vadodara, Nasik, Coimbatore, Bhubaneswar and Indore are gaining ground due to their profitability, growing talent pool and lower operational costs.

Data indicates that the demand for CCGs in tier 2 and 3 cities is expected to increase by 25-30% over the next few years. These cities offer unique advantages, including a lower cost of living, reduced pressure on infrastructure and untapped skills. Experts predict a 35 to 40 percent increase in job applications in these cities over the next two years.

Cost competitiveness and talent base

India’s cost competitiveness remains a major attraction for global businesses. Operational expenses in India are up to 40% lower than in Eastern Europe, allowing companies to achieve significant savings without compromising quality. The country’s vast talent pool further strengthens its position as a preferred destination in the GCC countries.

Programs like Skill India and Digital India have been instrumental in developing a skilled workforce. Additionally, India’s distributed talent ecosystem allows companies to leverage specialized skills across different regions. For example, Chennai and Mumbai have plenty of talent in financial services, while Hyderabad excels in life sciences.

GCCs transform into GICs

Another trend in the Indian GCC landscape is the transformation of GCCs into Global Innovation Centers (GICs). These centers focus on core transactions and innovation, often acting as hubs for niche development. This transformation is driven by the need for speed, robustness and specialized talent.

Smaller GICs also emerge as microcosms of parent GCCs, supporting core functions while fostering innovation. These centers are expected to become increasingly multifunctional, like their Tier 1 counterparts, as they mature.

Challenges and opportunities

Despite its rapid growth, the GCC sector in India faces several challenges according to the Inductus report:

1. Fragmented policy framework: Although national policies offer tailored incentives, they can create inconsistencies and complexities compared to the streamlined, centralized systems of countries like Ireland and Singapore.
2. Infrastructure gaps: Tier 2 and 3 cities often fail to offer the robust infrastructure required for large-scale operations in the GCC.
3. Limited R&D objective: India lags behind global hubs like Singapore in providing meaningful incentives to foster research and innovation.
4. Ease of doing business: Although improving, bureaucratic delays and multi-level approval processes continue to pose challenges for investors.

Addressing these challenges presents significant opportunities for India. By improving infrastructure in smaller cities, streamlining regulatory processes and providing strong incentives for R&D, India can further consolidate its position as a global leader in the GCC.

Global Perspective: Competing Destinations

While India leads the GCC market, other countries are also vying for a share of this lucrative sector. For example:

• Philippines: Known for its IT-BPO services and workforce training programs.
• Poland: A local destination in Europe with solid STEM training.
• Ireland: Offers low corporate tax rates and attractive R&D incentives.
• Singapore: Benefits from advanced digital infrastructure and innovation-friendly policies.
• Vietnam: An emerging hub with cost-effective labor and policy reforms.

India’s ability to stay ahead of its competitors will depend on its commitment to innovation, talent development and improved infrastructure.

Outlook

The future of the Indian GCC sector looks bright. With a workforce projected to reach 2.2 million by 2026, the sector is poised to play a pivotal role in India’s economic growth. The government’s new policy, combined with state-level initiatives, is expected to attract more investment and foster innovation.

As global companies continue to expand their presence in India in the GCC, the focus on Tier 2 and 3 cities will open up new opportunities and drive inclusive growth. By leveraging its cost advantages, talent pool and political support, India is well positioned to remain a global leader in the GCC landscape.