India’s Tier 2 & 3 Cities: Emerging hubs for Global Capability Centers
14 Mar 2025 / 05 min read
The growth of GCCs in India is not new, but the shift to tier 2 and 3 cities is a recent phenomenon. The country has been a preferred destination for GCCs due to its vast talent pool, favorable business environment, and government support.
India's tier 2 and 3 cities are witnessing a surge in the setting up of Global Capability Centers (GCCs), driven by the availability of talent, lower operational costs, and government incentives. This shift is transforming the country's outsourcing and offshoring landscape, with GCCs evolving into innovation hubs that drive growth and competitiveness.
According to a report by Zinnov-Nasscom, tier 2 and 3 cities now house about 7% of total GCC units in FY2024, up from 5% in FY2019. These emerging centers, termed Nano GCCs, are projected to grow by 15-20% by 2025, with a surge of 25-30% anticipated in subsequent years.
The growth of GCCs in India is not new, but the shift to tier 2 and 3 cities is a recent phenomenon. The country has been a preferred destination for GCCs due to its vast talent pool, favorable business environment, and government support.
“Offering cost advantages, access to fresh talent pool, and increasing business resilience, Tier-2 and emerging cities have into new growth frontiers for GCC expansion. These cities are driving the future of global operations in India and are a game-changing opportunity for businesses eager to expand beyond the saturated Tier-1 markets”, the Zinnov-Nasscom report said.
According to a report by AIM Research, while Bengaluru and Hyderabad lead the way, cities like Chandigarh and Indore, each accounting for 4% of total GCCs, are signaling a strategic shift in GCC location preferences.
The AIM Research report said that the distribution of GCCs is indicative of a balanced growth pattern across India’s metropolitan areas, with emerging tier-2 cities also beginning to play a pivotal role in this expansion. This widespread presence highlights the broadening impact of GCCs, extending their influence beyond the traditional urban hubs.
“The expansion of these centers has catalyzed ecosystem development, contributing to increased tax revenues, economic diversification, and the emergence of tier-2 cities as new growth centers”, the report said.
Kunal Ghatak, Partner, Business Consulting, EY India, Global Business Services, “compared to Tier-1 cities, Tier-2 cities have lower talent and infrastructure costs, which is helping optimize the total cost of operations”.
“State governments are incentivizing organizations to locate their GCCs in Tier-2 cities through favorable policies and schemes…Many companies have already opened up GCCs in Visakhapatnam, Coimbatore, Jaipur, Vadodara, Kochi, Chandigarh, and other locations” Ghatak said.
