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India’s Global Capability Centres (GCCs) are on the cusp of a major transformation, powered by sectors such as software, internet services and engineering research & development (ER&D). Concentrated largely in the country’s top six cities, where over 90% of GCCs currently operate, the sector has leveraged strong office infrastructure and a skilled talent base to scale rapidly. Valued at US$50 billion in FY24 and projected to more than double to US$110 billion by FY30 at a CAGR of 14%, the GCC industry is poised to consolidate India’s position as a global hub for high-end technological work. 

Against this backdrop, a new report from the Software Technology Parks of India (STPI) highlights the critical need for a comprehensive national GCC policy to overcome challenges and unlock opportunities in innovation, talent development and sustainable growth. While India’s GCC sector continues to expand at a rapid pace, the report notes that its trajectory is constrained by a complex set of challenges. 

Talent management is one of the most pressing issues. GCCs face intense competition for skilled professionals, driving up salary costs, especially in emerging technologies, where niche roles such as DevSecOps engineers command 1.5 times the compensation of their peers. Retaining talent is equally difficult, with millennials showing high attrition due to limited role variety and career progression. Compounding this, many centres struggle to hire mid- and senior-level professionals.

Regulatory and operational hurdles are challenges too. GCCs navigate overlapping labour laws, transfer pricing rules and compliance mandates that increase costs. The 2023 Finance Act’s hike in withholding tax and the heavy burden of audits have heightened compliance pressure. Transfer pricing issues, particularly around the lack of reliable comparable data and delays in Advance Pricing Agreements, create prolonged disputes and discourage expansion. Even in Special Economic Zones (SEZs), where incentives exist, rigid infrastructure policies and clearance delays constrain smooth operations.

To facilitate this transition, the report outlines several key recommendations, with a central focus on creating a more agile and supportive regulatory environment. Simplifying compliance frameworks, easing tax and transfer pricing complexities and introducing policies that promote high-value R&D within GCCs are positioned as immediate priorities.

Equally critical is addressing the talent agenda. The report calls for stronger industry-academia collaboration to close skill gaps in areas such as data science, AI, cloud and cybersecurity. Policies that enhance talent mobility across tier-2 and tier-3 cities, backed by improved digital and physical infrastructure, are also highlighted as vital. In addition, enabling smaller centers to scale beyond the 500-employee threshold is seen as a necessary step to increase their strategic influence and participation in global decision-making.

India’s ability to cement its position as the world’s premier GCC destination will depend on coordinated action by industry, government and academia. Building an ecosystem that fosters innovation, nurtures specialised talent and enhances ease of doing business will determine whether the sector can evolve from capability hubs into global engines of innovation.