By Lalit Ahuja
Budget 2023: Global Capability Centers (GCCs) in India have come of age. They have evolved from being a source of cost arbitrage to becoming centers of excellence for innovation, digital transformation and top talent. Pivoting through the challenges brought on by the pandemic, GCCs have demonstrated their resiliency and ability to meet the expectations of the headquarters on time and at scale.
Today, India is home to over 1500 Global Capability Centers (GCCs), generating over $33.8 billion in revenue – about 1% of the national GDP. GCCs are likely to scale up to $60-$85 billion by 2025 with the addition of over a million new jobs. GCCs are now becoming a strategic national agenda and a priority for all the major states given the tremendous sustainable job creation and investment opportunities.
For India to grow as a global GCC hub, GCCs would need the government’s support in the areas of infrastructure development, skill development, predictable taxation policies, and creating an ecosystem that fosters innovation .
Predictable taxation
GCCs in India have move up the value chain, delivering high-value, sophisticated work to their parent organizations. However, currently there’s a higher transfer pricing markup for high-value work done at GCCs, so India needs to support an appropriate, predictable and friendly transfer pricing policy to realise the full potential of the GCC sector.
Focus on infrastructure development Bengaluru, NCR, Hyderabad, Pune, Chennai and Mumbai are among the top GCC destinations. With the Tier 1 cities getting saturated, it will be encouraging if the budget can introduce steps to enhance the infrastructure and connectivity measures. The government should also consider incentivising state governments to proactively build GCC parks not only in metros but also in Tier 2/3 cities.
Bridging the skill gap
For India to continue growing as a global talent powerhouse, the government should work closely with industry bodies to bridge the increasing skill demand-supply gap. The budget should also introduce measures to continue the focus on upskilling/reskilling, sustainability and employability through online training programmes, industry collaborations, and establishment of e-labs for simulated learning settings.
Enriching innovation ecosystems
One of the key reasons why MNCs set up their GCCs in India is the robust start-up ecosystem the country offers. As innovation has emerged as the primary focus area in GCC strategy, start-up collaboration gives GCCs access to newer technologies that can help further the innovation agenda of the enterprise. With GCC revenue expected to more than double by 2025, it is important for the government to take prudent steps to help start-ups, thus creating a more fertile soil for GCCs.
In the present Budget, it is imperative that the government holistically assess the needs of the start- up community and prioritize the development of an ecosystem that fosters growth for the community. As the funding winter for the start-ups is said to continue for another 12 to 18 months, we need a more favourable capital gain tax system that encourages easy access to capital. The government should also consider tax exemptions in FDI and maintain a sharp focus on start-up.
infrastructure development.
(The author is CEO of ANSR, the market leader in enabling organizations build, manage and scale global teams through Global Capability Centers)
