Union Finance Minister Nirmala Sitharaman in the Lok Sabha during the first day of the Parliament session, in New Delhi, Monday, July 22, 2024.
Credit: PTI Photo
Bengaluru: India is a global capability centre (GCC) favourite in a hugely competitive global market, the Economic Survey said on Monday, asserting that the government has a crucial role in facilitating entry of global players keen on setting up GCC operations here.
The Survey says, “As per a study by Wizmatic, GCCs presently employ 32 lakh people, primarily engineers and scientists. They generated a combined revenue of $46 billion in 2023 and are estimated to generate a total revenue of $121 billion by 2030, roughly 3.5% of India’s GDP. Out of this, $102 billion will represent export earnings.”
Currently, GCCs account for more than 1% of the country’s GDP. As of March 2023, India housed over 1,600 GCCs. According to a PwC report, the country is poised to have 2100 GCCs by 2028 with the market size of the centres touching $90 billion.
Reasons for the GCC surge, as per the Survey, are India’s increasing-value-added services in law, IT, and management from 2020 (supported by data from the Asian Development Bank (ADB)) and global players looking at India to set up their back-office operations to balance their cost model driven by the Russia-Ukraine war and global inflation.
Government initiatives also had a role to play as per the Survey. It said, “Initiatives like streamlined tax regulations and compliance procedures for foreign companies for setting up GCCs, flexible labour laws, and single window clearance systems for faster approvals have eased the business process. Improved digital infrastructure (high-speed internet, data centres) has been a boon for GCC operations.”
State Governments of Karnataka, Telangana and Tamil Nadu have launched research and development (R&D) policies to expand the GCC landscape in sectors such as auto and electric vehicles, electronics, pharma and life sciences.
At the same time, the Survey observed, “Government support for identifying new business models for partnerships, simplifying the entry process, and emphasising trust and data security, among others, will further encourage the location of GCCs in India.” Promoting specialisations in higher education is also required.
While US and Europe-based MNCs have been establishing their capability centres for a long time, international players from the Asia Pacific region, especially Japan and South Korea, have begun setting up their R&D innovation centres in India over the past few years.
GCCs are also increasingly evaluating tier-II towns to expand their operations. As per a CBRE research report, about 22% of GCC centres were set up in tier-II cities during the first half of 2023.
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