India at the centrestage of global investments

In 2020 there were 1300+ Global Capability Centres (GCCs) in India, employing more than 1.3 million people and generating over US$ 33.8 billion in annual revenue that translated to an overall economic contribution of ~ US$100 billion. Currently ~25% of Fortune 500 Companies and ~15% of Forbes Global 2000 have GCCs in India. In the next 5 years, there is a potential for GCC sector to scale up by additional US$ 25-50 billion which would mean a potential gross output of US$ 180-260 billion and employment generation to the tune of 6 to 8 million.

However, to realise the potential, the GCCs would need some support in the areas of infrastructure development, increased investment in skill development, consistent taxation policies, and creating an ecosystem that fosters innovation

1. Physical and digital infrastructure development

India is currently the most preferred GCC destination, but big cities are getting saturated, infrastructure is not able to keep up the pace and GCCs will need to look beyond the current cities for the growing talent demand. There is a need for infrastructure improvement in big cities and also need to develop other cities as GCC hubs.

The government should look at incentivising organisations and state governments to proactively build GCC parks and infrastructure that can be leveraged for GCC setup. They should also look at reducing the setup time which currently runs from 3-9 months currently for space identification, approvals, physical setup, etc.

2. Increase Investment in skill development

While the initial stages of GCC setup was mostly around basic skills and cost arbitrage, the GCCs now have a higher focus on digital and over 50% of India-based GCCs are investing in emerging technologies. This has led to an increase in demand for talent with specialised skills in artificial intelligence, analytics, cloud, robotic process automation, machine learning, and internet of things, etc. India’s ability to attract GCCs in future will depend on availability of advanced skills in the digital space, hence the government should look at supporting stakeholders to open more institutions and labs that offer training/courses in these areas and also encourage current institutions to keep innovating their curriculum with active industry participation

The government can also run a Returning Expert Programme which will encourage professionals abroad to return to India. This will lead to more leaders sitting out of GCCs, who in turn can drive higher growth in future.

3. Consistent Taxation policies

Currently there is higher transfer pricing mark up on higher value adding work in GCCs which discourages companies from bringing high value adding activities to India. Infact, higher value adding activities should lead to more economic benefit, hence we should look at having a consistent or lower transfer pricing markup for such activities.

Most GCCs are concerned about litigations on classification of activities and what transfer pricing markup should be allowed. A consistent markup will remove that ambiguity and help GCCs bring more value adding activities to India.

4. Encourage innovation and startup ecosystem

In today’s age, innovation has become a key area of focus for all organisations. GCCs also want to do more innovation out of India. The government can look at setting up incubation hubs for innovation and provide incentives to organisations who innovate and generate intellectual properties in India.

Given that startups are at the leading edge of innovation, the government should look at creating an ecosystem to encourage startups to innovate and generate more intellectual properties.