Karnataka launches GCC policy, first state to do so

The Karnataka government on Friday unveiled the draft Global Capability Centres (GCC) Policy 2024-2029, targeting 500 new centres by 2029. This makes Karnataka the first state in the country to launch a dedicated GCC policy to attract investments in the growing sector.

The 2024-2029 policy aims to create 3.5 lakh new jobs and generate an economic output of $50 billion.

Through its ‘Beyond Bengaluru’ initiative to decentralise development, the state government will focus on incentivising GCCs to set up operations in cities including Mangaluru, Mysuru, and Hubballi-Dharwad-Belagavi, Kalaburagi, Tumakuru and Shivamogga with an aim to showcase the offerings and capabilities of these cities.

Among the incentives proposed are reimbursements on property tax and rental for GCCs setting up in Beyond Bengaluru area, reimbursing operational expenses for setting up co-working spaces in the areas, employees’ provident fund (EPF) contributions for new employees of the GCCs in those areas for the first two years of operation and of internet expenses for the first three years.

Further, as part of the policy, the state government will provide partial capital expenditure, grants for strengthening R&D infrastructure, focusing on especially AI; support for Nano GCCs (with employees between 5 and 50); offer exemption from Electricity Duty for five years and allow GCCs in Beyond Bengaluru areas to switch from commercial to industrial power tariffs.

Speaking at the event, Information Technology and Biotechnology Minister of the state, Priyank Kharge said, “Today, we proudly launch India’s first dedicated policy for Global Capability Centres (GCCs), reaffirming Karnataka’s position as the top destination for innovation and business transformation.”

Kharge said, “Through this policy, we expect the GCC sector to grow at a compound annual rate of 12-14% over the next decade and foresee Karnataka holding nearly 50% of the national GCC market share by 2029. We are committed to creating an ecosystem that fosters innovation, supports R&D, and nurtures top talent, ensuring Karnataka remains the most attractive destination for GCCs globally.”The Karnataka government will also establish three new technology parks—Global Innovation Districts—including one in Bengaluru and two in the Beyond Bengaluru clusters. These districts will have state-of-the-art infrastructure, including high-speed internet and reliable power supply, and will adhere to global sustainability standards.

The draft policy is now open for public comments, and the government invited inputs from all stakeholders to refine and strengthen the policy further.

A GCC is typically an overseas or offshore captive or back-office unit of a company headquartered in a foreign country which in-sources technology services, human resource, accounting & finance and other related business functions.

Also read: India’s GCC count rises to 1,700 in FY24

Other incentives

Currently, of the 1,700 GCCs housed by India employing more than 1.9 million workforce, more than 500 are based out of Karnataka, largely in Bengaluru, providing employment to 0.6 million people.

As of now, Karnataka accounts for GCC revenue at $22.2 billion, nearly 35% of the GCCs registered in India which generate $64.6 billon revenue.

“Our target is to establish 500 new GCCs by 2029, which will create 3.5 lakh new jobs and generate an economic output of $50 billion,” said Ekroop Caur, secretary to the Government of Karnataka’s department of electronics, IT, BT and S&T.

Over the last few years, GCCs have evolved from being cost-centric back-office hubs to strategic entities becoming critical drivers of global strategic initiatives, R&D, and technology solutions within multinational corporations (MNCs). The GCCs have grown at nearly double digits (~9.8%) between FY2019 and FY2024.

The GCC policy by Karnataka will also aim to ease regulations with a dedicated helpdesk to streamline and expedite processes, reimburse quality certification fees, statutory fees for filing domestic patents to promote intellectual property and processing of permissions for cable laying and tower erections within 30 days of the applications.

Besides recruitment assistance, for skilling of employees and getting high-potential talent, the policy will also financial incentives and grants such as reimbursing 50% of the internship stipend up to Rs 5,000 for interns for up to three months. This will be for maximum of 20,000 interns per year and 100,000 interns over policy period.

“The Karnataka government’s pioneering announcement of a dedicated Global Capability Center (GCC) policy, a first-of-its-kind initiative at the state level, is a highly commendable development…The new policy, coupled with strategic interventions, is poised to strengthen the GCC ecosystem further, thereby attracting both occupiers and investors to the state. Moreover, this policy can potentially create opportunities beyond Bengaluru, accelerating development in other regions of Karnataka… aligns favourably with the prevailing growth momentum and will foster a resilient ecosystem that seamlessly integrates real estate and talent,” said Ram Chandnani, managing director, advisory & transaction services at real estate consulting firm CBRE India.