MeitY forms panel to create national framework for GCCs

The ministry of electronics and IT has formed an industry-led panel to help boost the growth of global capability centres (GCC) in India, people aware of the plans said, seeking to create the necessary national framework announced in the federal budget. Collectively, they have a revenue base that already exceeds a fourth of India’s much older $250-billion outsourcing industry.

Industry body Nasscom, GCC-enablers Zinnov Consulting and ANSR, audit and advisory firm KPMG, and investment promotion agency Invest India are members of the committee formed last month, sources told ET.

The government in the February budget had said it will develop a framework “as guidance to states for promoting Global Capability Centres in emerging tier 2 cities.” This would suggest measures for enhancing availability of talent and infrastructure, building bylaw reforms, and mechanisms for collaboration with industry.

The committee is likely to meet for the first time in coming weeks and has a term of one year, sources added.

“With GCCs having gone mainstream, the government’s policy construct needs to transition from an incentive framework to an innovation framework,” said Ramkumar Ramamoorthy, partner at tech growth advisory firm Catalincs.

“With global companies spending a significantly higher percentage of revenues on R&D and innovation, the new policy framework on GCCs should catalyse technology transfer, enable local IP creation and global integration, drive cross-border industry-academia collaboration and research and create ways for multi-directional flow of money, and create a platform for greater collaboration among players with the startup ecosystem.”

The framework should help connect the dots across multiple standalone policies on IT, hardware, GCCs, startups, deeptech, education and skilling, data security and intellectual policy, and not look at technology-enabled opportunities in silos, Ramamoorthy said.Members of the committee did not respond to ET’s queries by press time on Tuesday.

GCC Capital

India has more than 1,760 GCCs with an average of one to two GCCs being added every week, as per industry estimates. This is expected to reach 2,200 by 2029.

GCCs currently employ about 1.9 million people in the country and generate $64.6 billion in revenues, as per a Nasscom-Zinnov report.This is projected to reach about $99-105 billion by FY2030, employing 2.5-2.8 million people.

The industry has flagged taxation, particularly the ‘safe harbour’ policy, as a major hurdle to the ease of doing business.

Under these rules, the income tax authorities accept the transfer price declared for certain international transactions, to provide relief to multinationals which have set up GCCs in India. In March, the government in an interim notification increased the eligibility turnover threshold to Rs 300 crore from Rs 200 crore.

But the new level is way below Nasscom’s recommendation of Rs 2,000 crore.

At present, 95% of the eligible companies are not opting for the benefit due to litigation fears. Relaxing the rules will help the ambitions of the central and state governments to attract more GCCs to set up shop in India, according to industry experts.

“A significant hurdle GCCs are facing is the lack of a uniform, standardised definition of a GCC across various Indian ministries and state governments with their GCC policies,” said Alouk Kumar, CEO, Inductus which helps GCCs set up in India. “This absence creates considerable regulatory ambiguity for multinational corporations looking to set up or expand.”

Regulatory and compliance burdens, including intricate tax structures like transfer pricing, complex SEZ regulations, and evolving data localisation mandates demand immediate attention, Kumar said.

Moreover, incentives across states are uneven and often insufficient, Kumar said.

Further, demand–supply gaps in talent, especially now that there is a greater focus on specialised AI, data science, and cybersecurity skills among GCCs, risks bottlenecking innovation and eroding the cost advantage that drew captives to India.

Large cities like Bengaluru, Hyderabad, Mumbai, Chennai, and Delhi are the major GCC hubs.

Various states have come out with GCC policies with sops to attract multinationals to set up, the latest being Uttar Pradesh earlier this month. States like Tamil Nadu and Karnataka also have policies with provisions such as payroll subsidies and incentives to expand to smaller cities.

ET reported in December that states like Madhya Pradesh, Telangana and Andhra Pradesh are also drafting their own GCC policies.