Economic survey highlights government's key role in attracting Global Capability Centers to India

India has become a top destination for Global Capability Centers (GCCs) in the competitive global market, according to the Economic Survey released on Monday. The survey emphasizes the government's crucial role in attracting multinational companies to establish their GCC operations in the country.

The Economic Survey commends India's success in the GCC sector, noting that government initiatives such as identifying new business models, simplifying entry processes, and emphasising trust and data security are pivotal in attracting more GCCs to India. Over the past few years, more than 150 multinational corporations have established their GCCs in India, marking significant growth from the early days of offshoring by Texas Instruments.

GCCs are offshore units set up by multinational companies to handle a range of strategic functions for their parent organizations. Initially focused on simple back-office tasks, GCCs in India now manage some of the most complex functions across various industries.

The Survey highlights that GCCs contribute significantly to their parent companies' success and India's economic growth, accounting for over 1% of the country's GDP. This share is expected to increase further.

India's journey in the GCC space began with Texas Instruments setting up its office in Bengaluru in 1985. Since then, the number of GCCs in India has grown from about 760 in 2012 to over 1,600 as of March 2023.

GCCs in India offer bespoke services in operations, product development, and innovation across IT, BPO, engineering, and software product development sectors. They are prominent in industries such as banking and financial services, software, telecom, and semiconductors, with increasing presence in aerospace, automotive, oil and gas, healthcare, and pharmaceuticals.

The Survey acknowledges the government's role in fostering the proliferation of GCCs through strategic initiatives like Digital India, which has streamlined online approvals and licensing processes. Other supportive measures include streamlined tax regulations, flexible labor laws, and single-window clearance systems for faster approvals.

Improved digital infrastructure, including high-speed internet and data centers, has also benefited GCC operations. States like Karnataka, Telangana, and Tamil Nadu have been proactive in expanding the GCC landscape.

The Economic Survey notes that GCCs are increasingly exploring tier-II towns for expansion, driven by reverse migration trends during the pandemic and the cost advantages of these under-penetrated markets. Enhanced infrastructure development in these cities has further increased their attractiveness.

While US and European MNCs have been setting up GCCs for a long time, recent years have seen companies from the Asia Pacific region, especially Japan and South Korea, establishing their R&D and innovation centers in India.

Despite the emergence of other countries with GCC presence, India remains a preferred destination due to its ample talent pool and cost advantages, the Survey concludes.

(With PTI inputs)