The Hindu: Published on 19th Jan 2026:
Why in News?
India has entered a decisive phase in its economic and technological evolution with the rapid transformation of Global Capability Centres (GCCs). What began decades ago as low-cost outsourcing units have now evolved into strategic global hubs that shape innovation, product development, and corporate decision-making for multinational corporations. By early 2026, India has emerged as a global nerve centre for advanced digital work, with more than 1,800 GCCs employing close to two million professionals. These centres now handle complex functions such as artificial intelligence development, semiconductor design, cybersecurity architecture, and enterprise strategy formulation.
The growing importance of GCCs has drawn policy attention due to their increasing contribution to India’s GDP, employment generation, and technological sovereignty. At the same time, new challenges related to cybersecurity, global taxation reforms, talent shortages, and geopolitical uncertainty have emerged. This transformation has therefore become a major subject of discussion in economic policy circles, making it highly relevant for national development planning and global competitiveness.
Background: Evolution of GCCs in India:
The journey of Global Capability Centres in India has unfolded in distinct phases, each reflecting the country’s growing sophistication in global value chains.
Initially, during the late 1990s and early 2000s, GCCs were established primarily to take advantage of India’s low-cost skilled labour. Their work was limited to basic IT services, data processing, customer support, and back-office operations. The core business decisions remained firmly in the headquarters of multinational firms located in developed countries.
The second phase witnessed a shift from routine tasks to process optimization. Indian centres began handling finance, analytics, and engineering support. Though still largely execution-driven, they became integral to business continuity.
The third phase marked a strategic transition. From around 2015 onward, GCCs started contributing to product design, innovation, and advanced analytics. Companies increasingly trusted Indian teams with core business responsibilities.
The current phase, often described as GCC 4.0, represents a fundamental transformation. Indian GCCs are no longer peripheral support systems. They now act as centres of excellence responsible for end-to-end product development, research and development, artificial intelligence deployment, and intellectual property creation. This phase signifies India’s movement from a service economy to a knowledge-driven innovation economy.
India as a Global Innovation Hub:
India’s GCC ecosystem today plays a central role in the global innovation architecture. Nearly 58% of GCCs are actively investing in advanced technologies such as Agentic AI, autonomous systems, quantum computing, cloud architecture, and cybersecurity frameworks. These centres are not merely implementing instructions but are shaping the future technological roadmap of their parent corporations.
The presence of a vast, young, and technically skilled workforce gives India a unique advantage. Companies benefit from the “follow-the-sun” model, where innovation continues across time zones, drastically reducing product development cycles. Indian GCCs also act as global Centres of Excellence in domains such as finance, legal compliance, data science, and risk management.
Importantly, India’s role is no longer confined to technology alone. GCCs are now involved in corporate governance, strategic planning, and global operations management. This elevation reflects the growing trust of multinational corporations in India’s intellectual capital.
Socio-Economic Impact of GCC Growth:
The expansion of GCCs has had a profound impact on India’s economy and society. One of the most significant outcomes has been the creation of high-quality employment. These jobs offer higher wages, better career mobility, and exposure to cutting-edge technologies, thereby contributing to the rise of a globally competitive professional class.
Another major development is the geographic diversification of growth. While earlier GCCs were concentrated in metropolitan cities such as Bengaluru and Hyderabad, new investments are increasingly flowing into Tier-II and Tier-III cities like Coimbatore, Indore, Kochi, Jaipur, and Bhubaneswar. This shift is helping reduce urban congestion, balance regional development, and curb migration pressures on megacities.
Additionally, the GCC boom has strengthened India’s innovation ecosystem by encouraging collaboration between industry, startups, and academic institutions. It has also increased demand for advanced technical education, indirectly improving the quality of higher education and research infrastructure.
Emerging Challenges and Structural Risks:
Despite its success, India’s GCC-led growth faces serious challenges that could undermine its sustainability if left unaddressed.
One of the most pressing concerns is the widening talent gap. While India produces a large number of engineers annually, the supply of professionals skilled in niche areas such as AI security, quantum computing, and advanced cloud architecture remains limited. This mismatch has triggered intense competition for talent, leading to wage inflation and high attrition rates, which could reduce India’s cost competitiveness in the long run.
Cybersecurity has emerged as another critical vulnerability. With GCCs handling sensitive global data, India has become a prime target for cyberattacks. According to recent reports, India accounts for a significant share of global cyber incidents, including state-sponsored attacks. The implementation of the Digital Personal Data Protection Act has increased compliance requirements, making cybersecurity not just a technical issue but a legal and reputational concern.
Taxation and regulatory uncertainty further complicate the landscape. The introduction of the OECD’s Global Minimum Tax has reduced the benefits of tax arbitrage that once attracted foreign investment. At the same time, India’s 24% safe harbour markup for software R&D continues to be a point of contention for multinational firms seeking predictability in tax treatment.
Geopolitical tensions also pose long-term risks. The growing trend of digital protectionism, data localization policies, and re-shoring strategies—particularly in the United States and Europe—could slow the expansion of India-based GCCs. Any move towards restricting cross-border data flows would directly affect India’s role as a global services hub.
Government Initiatives and Policy Direction:
Recognising the strategic importance of GCCs, the Indian government has begun taking steps to strengthen the ecosystem. The proposed National GCC Policy Framework under the 2025–26 budget aims to streamline regulations, improve ease of doing business, and promote India as a preferred destination for global innovation centres.
The Digital Personal Data Protection Act seeks to balance data security with business efficiency, although its implementation will require careful calibration to avoid overregulation. Additionally, skill development programs under initiatives such as Skill India and Digital India are being aligned to meet the emerging needs of deep-tech industries.
However, experts argue that policy intent must be matched by swift execution and inter-ministerial coordination to yield tangible outcomes.
Way Forward: Ensuring Sustainable GCC Growth:
To consolidate its position as the world’s innovation capital, India must adopt a forward-looking and facilitative approach. Introducing a dedicated Single-Window Clearance system for GCCs would significantly reduce bureaucratic delays and improve investor confidence. Such a system should integrate approvals related to taxation, labour laws, data compliance, and infrastructure.
Strengthening industry-academia collaboration is equally crucial. Universities must align curricula with industry needs, while corporations should actively participate in curriculum design, internships, and applied research. This will help bridge the skill gap in emerging technologies.
Fiscal policy reforms are also essential. Rationalising transfer pricing norms, providing stable tax regimes, and offering targeted incentives for R&D-intensive operations would ensure long-term investment stability.
Finally, cybersecurity must be treated as a national strategic priority. Investments in cyber resilience, threat intelligence sharing, and indigenous security technologies will be vital to protecting India’s digital assets and global reputation.
Conclusion:
India’s transformation from a back-office economy to a global brain trust marks a defining moment in its developmental journey. Global Capability Centres have become engines of innovation, employment, and strategic influence. However, sustaining this momentum requires more than market forces—it demands visionary policymaking, institutional reforms, and continuous investment in human capital.
If India successfully addresses challenges related to skills, cybersecurity, taxation, and geopolitical uncertainty, it is well positioned not just to participate in the global knowledge economy, but to lead it. The GCC revolution, if nurtured wisely, could become one of the strongest pillars of India’s economic future in the coming decades.
