Overview of Global Capability Centres (GCCs) in India
The Confederation of Indian Industries (CII) has proposed various measures to promote Global Capability Centres (GCCs) in India, emphasizing the need for tax incentives, improved infrastructure, and skill development. With nearly half of all GCCs located in India, the sector significantly contributes to the national economy and has the potential for further growth.
Key Contributions and Current Trends
- India hosts nearly 1,800 GCCs, with expectations to grow to 5,000 by 2030.
- The GCC sector contributes approximately $68 billion as Direct Gross Value Addition (GVA), representing 1.8% of India's GDP.
- The sector is pivotal to India's transition from a back office to a hub for high-tech services, mirroring China's role in tech hardware.
Demographic and Economic Impact
- India-based GCCs employ over 2 million professionals, with the potential net employment impact reaching around 10.4 million by FY25.
- Every direct job at a GCC generates one indirect job in allied services and three induced jobs through economic activities.
- The sector could contribute between $470–$600 billion to India's GDP by FY30, driven by Direct, Indirect, and Induced economic impacts.
Policy Recommendations and Challenges
- India should target high-priority sectors for GCC promotion, including BFSI, Retail, Automotive, and Technology.
- Institutionalization of forward-looking tax incentives, including concessional tax regimes and tax holidays, is recommended.
- The development of Digital Economic Zones (DEZs) with a multi-tier regulatory framework is suggested for streamlined governance.
- Addressing the skills gap is crucial, with a projected increase from 25% in 2023 to 29% by 2028, particularly due to AI advancements.
- Improving industry-academia collaboration and reskilling strategies are vital to address employability concerns.
Concerns Regarding IT Services Overlaps
There is an emerging concern about the overlap between GCC operations and traditional IT services, potentially impacting the latter's export capabilities. Policymakers are wary that growth in GCCs might undermine domestic IT firms by overlapping in functions or failing to generate substantial intellectual property.
Strategic Recommendations
- Implement targeted concessional tax regimes for strategic service sectors.
- Recalibrate safe harbour markups to align with global norms and broaden eligibility for GCCs.
- Enable GST relaxation for GCCs to alleviate working capital constraints.
- Foster a conducive environment for R&D and IP creation through incentives and regulatory support.