Govt should provide an environment that is conducive for GCCs

Global capability centres (GCCs) seem to be emerging as the growth hubs which, in turn, can play a catalytic role in boosting a variety of sectors besides generating employment. ICICI Securities, in a recent note, has estimated that the share of GCCs in India’s GDP would double to two per cent by 2030. The NDA government, in its third term, will do well to ensure that GCCs flourish. A key difference between business processing outsourcing (BPO) firms and GCCs is that while the former catered to the needs of various clients, the latter are owned by MNCs. Another difference is that GCCs are involved in the core activities of the companies, which own them. Both, however, provide offshore services to MNCs.

At present, GCCs generate about $46 billion in revenue which, the brokerage said, is expected to rise to $100 billion by 2029-30. It is testimony to India’s technological prowess that it has about half of the world’s GCCs. According to the ICICI Securities note, GCCs grew by 11 per cent between 2015 and 2023, which was more than seven per cent of domestic Indian IT services firms in the same period.

A report by Deloitte India and Nasscom in August last year said, “India’s ascendancy as a ‘Digital Talent Nation,’ spearheading global aspirations to become a digital technology hub, is tangible. Fueled by rapid infrastructure growth, diverse skills, burgeoning start-ups, and governmental initiatives, these emerging hubs are gearing to achieve the tier-1 status.” The Deloitte-Nasscom report also underlined another beneficial aspect of GCCs: geographical decentralization. It identified 26 promising locations with the potential to become the epicentre of innovation and growth.

“Over 140 global capability centres (GCCs) have found a home in these locations, highlighting the growing interest of global enterprises in these promising emerging hubs.” If the trend continues, it will make smaller cities more prosperous and attractive to youngsters. For the trend to continue and grow, one must take into consideration some prerequisite conditions. The government must rein in taxmen and taxwomen, for they have often been the bane of many sectors. They demand more than Rs, one lakh crore from online gaming companies, in spite of the fact that the total size of the entire sector is a fraction of that amount.

In other words, if the tax department wins the case, the companies will file for bankruptcy, resulting in the loss of tens of thousands of jobs and the end of a sector whose vibrancy has been praised by no less a person than Prime Minister Narendra Modi. Revenue demands come in other forms too. The telecom sector, which was once booming, was severely hit by adjusted gross revenue (AGR) dues. AGR, a revenue-sharing mechanism between the government and telecom companies, hit Vodafone Idea and Airtel badly; the former came dangerously close to a shutdown and the sector faced the prospect of duopoly. Then there are the issues of tight regulation and burdensome compliances. If unchecked, such issues can seriously hurt the prospects of GCCs—indeed any industry which seems promising in the foreseeable future. With a ‘once bitten, twice shy’ mindset, the government should provide an environment that spells all-round growth of GCCs and sunrise sectors.