India is rapidly emerging as the epicentre for Global Capability Centres (GCCs), attracting a multitude of multinational corporations due to its unique blend of advantages. With a combination of a highly skilled workforce, cost-effective operations, and advanced technological infrastructure, India has become a preferred destination for establishing these offshore centres, also known as global in-house centres (GICs) or global captive centres. These centres are integral to their parent organisations, offering specialized services in IT, research and development, customer support, and various other business functions.
India’s strategic advantages, coupled with proactive government policies and a rapidly evolving technological landscape, have positioned the country as a global leader in the GCC market, ensuring continued growth and dominance in this sector.
TECHNOLOGICAL EVOLUTION
India’s technological landscape is robust and rapidly evolving, particularly in digital skills. According to Stanford’s AI Index Report 2023, India ranks as the global leader in AI penetration and adoption, achieving a strong score of 3.2. The report evaluates countries across various parameters, including research and development, technical performance, AI ethics, economic impact, education, public governance, diversity, and public opinion.
India’s digital talent pool, with expertise in cloud computing, Artificial Intelligence (AI), big data, and the Internet of Things (IoT), has expanded at a compound annual growth rate (CAGR) of over 35% over the past four years. By the end of 2024, this talent pool is expected to reach 2.6 million. The abundance of digital skills and capabilities in India has spurred a significant increase in the number of GCCs, which are now spearheading digital transformation initiatives for their parent organisations. Cities like Bangalore, Hyderabad, and Pune have become key technology hubs, known for their advanced infrastructure and thriving innovation ecosystems. Additionally, hyper-automation—powered by AI and data—is emerging as a crucial strategy for transforming GCC operations, empowering employees, and establishing Centres of Excellence (CoEs).
BURGEONING TALENT POOL
India has solidified its dominance in the global GCC market, commanding over 50% of the share. This leadership is driven by the country's exceptional talent pool and a dynamic startup ecosystem, making it a top destination for companies establishing captive centres. With over 1.5 million engineering graduates and millions of graduates from other disciplines entering the workforce each year, India offers a vast and growing reservoir of talent, positioning the country as an ideal hub for these operations.
Currently, GCCs in India employ approximately 3.2 million people, primarily engineers and data scientists. In 2023, these centres generated a combined revenue of $50 billion, with projections estimating this figure will rise to $121 billion by 2030. By then, GCCs are expected to contribute around 3.5% to India’s GDP, a significant increase from the current 1%.
A key factor in India’s competitive edge is the cost-effectiveness of its skilled labour, which remains significantly lower than in many Western countries. This economic advantage, coupled with a high-quality education system, has enabled India to evolve from a traditional IT outsourcing hub to a comprehensive outsourcing destination. A joint report by McKinsey and NASSCOM in 2005 already highlighted India’s dominant position, accounting for 65% of the global offshore IT industry and 46% of the global Business Process Offshoring (BPO) market. Today, India’s status as a global outsourcing leader has only strengthened, with approximately 1,600 GCCs operating in the country, employing around 2 million people and generating roughly $50 billion in annual revenue.
INDIAN GOVERNMENT INITIATIVES
The Indian government has played a pivotal role in fostering the growth of GCCs, offering various incentives and initiatives to attract foreign investment. Special Economic Zones (SEZs) have been established, providing companies with tax incentives and other benefits to set up their GCCs. Additionally, significant measures such as corporate tax reductions, the introduction of concessional tax regimes, and the elimination of the minimum alternate tax regime have created a business-friendly tax environment. To instil trust and confidence among foreign investors and minimize disputes, the government has also implemented globally accepted best practices, including safe harbour rules, an advanced pricing regime, an effective MAP program, and the adoption of the sixth method for transfer pricing analysis. Furthermore, policies promoting innovation and research, and development have enabled captive centres in India to develop cutting-edge technologies and services.
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