Global capability centres in India: a strategic hub for innovation and excellence

Gaurav G Arora^[1]
JSA, Gurugram
gaurav.arora@jsalaw.com

Global capability centres (GCCs) have become a cornerstone of India’s modern business landscape. These entities, established by multinational corporations, manage a range of functions from IT services and back-office operations to advanced research and development (R&D). Over the past few decades, India has been transformed into the world’s leading destination for GCCs, owing to its skilled workforce, cost advantages and a business environment that is increasingly becoming supportive. This article examines the evolution, significance, challenges and prospects of GCCs in India, drawing on recent government initiatives and industry trends.

The evolution of GCCs in India

The journey of GCCs in India began in the early 1990s, coinciding with the liberalisation of the Indian economy. Initially, these centres were set up to capitalise on cost arbitrage, handling routine operations at a fraction of the cost incurred in developed markets. However, over a period, the scope of GCCs has expanded considerably. Today, most of GCCs are at the forefront of innovation, managing high-value functions, such as software engineering, data analytics and product development.

According to a recent report,^[2] India now hosts over half of the world’s GCCs, with Bengaluru emerging as the global epicentre. The city alone accounts for a significant share of the 1,700+ GCCs operating in the country, collectively employing nearly 1.9 million professionals.^[3] This remarkable growth has been facilitated by regulatory reforms, such as the liberalisation of foreign direct investment norms, the establishment of special economic zones and the simplification of company law and tax regulations.

The significance of GCCs in India

Talent pool and innovation

India’s vast and technically skilled workforce is a primary driver behind the proliferation of GCCs. The country produces many engineering and technology graduates each year, many of whom possess expertise in emerging fields, such as artificial intelligence, machine learning and cybersecurity. This talent pool has enabled multinational corporations to move beyond cost-saving operations and invest in R&D. Companies like Google, IBM and Intel have established R&D centres in India, contributing to advancements in cutting-edge technologies.

Cost efficiency

While cost efficiency remains a key attraction, the focus has also shifted towards value creation. India offers a favourable cost structure not only in terms of labour, but also in regard to infrastructure and operational expenses. This enables companies to achieve significant operational efficiencies without compromising on quality.

Strategic location and ecosystem

India’s strategic location in the Asia–Pacific region, coupled with its robust IT infrastructure, makes it an ideal hub for global operations. The country’s time zone allows for seamless collaboration with teams across Europe, the Americas and Asia.

Government initiatives and policy support

Recognising the strategic importance of GCCs, the Indian government has introduced several initiatives to foster their growth. The ‘Digital India’, ‘Make in India’ and ‘Startup India’ programmes are a few examples of such initiatives, which have created a favourable ecosystem for technology and innovation. The recent Union Budget 2025-26 announced the development of a national framework to boost GCCs in tier two cities, aiming to decongest major urban centres and create new growth opportunities.^[4]

States such as Uttar Pradesh and Telangana have also launched dedicated policies to attract GCC investments. Uttar Pradesh’s new GCC policy is expected to generate significant employment opportunities and attract fresh investment.^[5] Meanwhile, Telangana’s focus on the IT sector and GCCs is seen as a key driver of its ambition to achieve a $1tn economy.^[6]

Challenges faced by GCCs in India

Talent retention

Despite the abundance of skilled professionals, retaining top talent remains a persistent challenge. High attrition rates, driven by competitive job markets and opportunities abroad, necessitate greater investment in employee engagement, career development and competitive compensation packages.

Regulatory complexity

Navigating India’s regulatory landscape can be complex. Issues such as tax compliance, labour laws, data protection and intellectual property rights require careful management. While the government has made progress in improving the ease of doing business, further reforms are needed to streamline compliance and reduce bureaucratic hurdles.

Infrastructure constraints

Although India’s IT infrastructure is robust, other aspects, such as urban transport, power supply and city planning, require improvement. Major GCC hubs such as Bengaluru and Hyderabad often face challenges related to traffic congestion and inadequate public transport. Addressing these issues is essential for the sustainable growth of the sector.

Future prospects of GCCs in India

Digital transformation and innovation

The global shift towards digital transformation presents significant opportunities for GCCs in India. These centres are expected to play a key role in areas such as cloud computing, cybersecurity and advanced analytics. Multinational corporations are likely to increase investment in R&D, fostering collaboration with Indian universities and research institutions.

Expansion into tier two cities

There is a growing trend of expanding GCC operations into tier two cities, such as Coimbatore, Jaipur and Chandigarh. These cities offer cost advantages, a skilled workforce and a better quality of life, which can help decongest major urban centres and create new avenues for growth.

Policy and legal support

Ongoing reforms in regard to taxation, labour laws, data protection and intellectual property rights are expected to further enhance the ease of doing business. Legal advisors play a crucial role in helping GCCs navigate these evolving frameworks and leverage government incentives.

Conclusion

GCCs have become an integral part of India’s economic landscape, driving innovation, creating employment opportunities and enhancing the country’s global standing. The evolution of GCCs from cost centres to strategic hubs of excellence underscores India’s potential as a global business destination. While challenges such as talent retention, regulatory compliance and infrastructure availability need to be addressed, the prospects for GCCs in India remain bright. With continued investment in digital transformation, innovation and government support, India is well-positioned to strengthen its status as the world’s leading hub for global capability centres.