Can Budget 2025 Help India Retain its GCC Leadership
India’s global capability centre (GCC) journey has been remarkable, with over 1,580 GCCs employing 1.66 million people in the country. India has established itself as a global leader in the GCC space owing to its strong technology ecosystem, talent availability, cost advantages, and political stability in an uncertain world. However, a new factor that could reshape this landscape has emerged: DeepSeek. Experts see it as a game changer, highlighting the need for India to be more agile and flexible in its policies. To stay ahead, rapid policy adaptation and proactive decision-making will be essential. In an interview with AIM, Alouk Kumar, founder and CEO of Inductus, said the Indian government, in its last Economic Survey, projected that GCCs would contribute 3.5% of the total GDP by 2030. However, the Inductus team’s research suggests that this number could cross around 5%, especially with the rise of DeepSeek, which could accelerate GCC expansion in India. Kumar said that after DeepSeek, most offshore companies and global giants have clearly realised that they must reduce the cost of operation, considering China reportedly spent just $5 million to build the AI company. A Shift Beyond Metro Cities India’s leading GCC hubs – Bengaluru, Hyderabad, Delhi, Chennai, Mumbai, and Pune – have traditionally been the preferred locations for setting up the centres. However, growth in these cities is slowing down due to rising costs, infrastructure strain, and the shift towards remote work. Regarding the Budget expectations for 2025, Raghavendra Vaidya, MD and CEO of Daimler Truck Innovation Center India (DTICI), said, “We hope the government can streamline the process of running a GCC from a tax and infrastructure standpoint and can invest in more infrastructure as it would be greatly beneficial.” This has prompted many companies to explore alternative locations, including countries outside India. To retain its leadership in the GCC sector, India needs to decentralise operations and focus on Tier-2 cities. “The success of GCCs in India to the tune of 70% depends upon the right kind of resources,” Kumar pointed out. Finding the right talent has become a bigger challenge than building office spaces, and “some of the GCCs are also suffering” due to hiring difficulties. A possible solution, according to Kumar, is to “expand the base out of a particular location”. Currently, most GCCs are concentrated in the southern states or one or two particular locations. However, many Tier-2 cities now have “several good educational institutions”, providing a strong talent pipeline. Government’s Role in Promoting Tier-2 Cities For this expansion to be successful, Kumar highlighted that Budget 2025 should “come out with some kind of incentive for setting up GCCs in Tier-2 cities”. Such initiatives could benefit locations such as Hubballi, Jaipur, Trivandrum, and others, reducing the pressure on metros while promoting inclusive economic growth. Kumar highlights that industry leaders hope for policies in the upcoming Budget that support innovation hubs and talent development. Government initiatives must be aligned with recent industry shifts, such as DeepSeek, which is being seen as a major turning point for India’s GCC sector. Moreover, India needs to stay competitive globally. “The next war on the horizon is going to be fought on cost, innovation and R&D,” Kumar added. Global companies are now looking to cut operational costs, and offshoring has become a necessity. Kumar further elaborated that increasing R&D spending is essential for India to “sustain and take forward this once-in-a-lifetime opportunity” in the evolving global landscape. Currently, India’s R&D expenditure stands at 0.7% of GDP, but experts advocate raising it to 1.5% to maintain competitiveness and drive innovation. Kumar suggested that India should “extend or expand it to 1.5% of the GDP at a minimum” to ensure sufficient investment in R&D. Countries like Vietnam and Singapore offer three to five years of tax holidays on the establishment of GCCs. Kumar believes that the Indian government might consider introducing similar tax incentives. Besides, linking incentives to hiring numbers could provide further motivation for global firms to expand in India. “If India can come out with that kind of tax incentive, they can have tax holidays. But apart from that, they can also link it up with the number of deployments and number of hirings.” Furthermore, Deloitte’s Budget Expectations 2025 report for GCC also highlights that considering GCCs have now transformed from “merely back offices but drivers of innovation in their business groups”, the government may evaluate providing certain tax breaks for GCCs. This includes a tax holiday for a certain number of years or a concessional tax rate of 15%, akin to the concession provided under Section 115BAB to the entities in the manufacturing sector that are set up after April 1, 2019 and have started manufacturing by March 31, 2024. India Needs a Unified GCC Policy While individual states like Madhya Pradesh, Telangana, and Tamil Nadu have introduced their own GCC policies, there is no unified national policy to streamline expansion. A leader in the industry pointed out that this creates confusion for companies looking to invest in India. A single-window system in Delhi could make the process easier. “New Delhi should have some kind of single-window system or advisory support where they can go,” Kumar suggested. Companies from different industries have different requirements. According to Kumar, if someone wants to set up a GCC in India for financial services, they can’t go to Bengaluru or Hyderabad. “Probably, they would prefer to go down to Mumbai.” A structured approach, in this case, would help create sector-specific hubs across different cities.
The Indian government, in its last Economic Survey, projected that GCCs would contribute 3.5% of the total GDP by 2030.
The Indian government, in its last Economic Survey, projected that GCCs would contribute 3.5% of the total GDP by 2030.
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Shalini is a senior tech journalist, exploring the latest advancements in AI. When she's not reporting on the latest innovations, you can find her immersed in her next literary adventure.