Why in the News?
India and the United Kingdom are nearing the finalisation of a Free Trade Agreement (FTA) that is expected to significantly reshape their bilateral economic relationship. A key area of focus is the expansion of Global Capability Centres (GCCs) in India.
What are GCCs (Global Capability Centres)?GCCs are offshore units set up by multinational companies (MNCs) in countries like India to handle critical business functions. |
How can GCCs boost the India-U.K. FTA?
- Enhance Digital Collaboration: GCCs in India offer services like AI, cybersecurity, and R&D that align with the UK’s digital economy goals. Eg: British companies like Barclays use India’s GCCs for advanced analytics and digital banking solutions.
- Support Professional Mobility: GCC operations require movement of skilled professionals between India and the UK, pushing for smoother visa and work policies. Eg: Infosys and TCS facilitate cross-border staff exchanges for UK-based projects.
- Strengthen Global Supply Chains: GCCs act as strategic hubs for managing global operations and reducing dependency on single markets. Eg: Unilever runs global compliance and finance functions from its India GCC, supporting resilience and efficiency.
Why is India a preferred hub for GCCs?
- Cost Advantage: Operating a GCC in India is more cost-effective compared to Western countries, enabling firms to maintain quality while optimizing costs. Eg: Target Corporation runs its Indian GCC in Bengaluru to handle IT services and supply chain support at reduced costs.
- Robust Digital Infrastructure: India’s expanding digital ecosystem and government support through policies like Digital India attract companies to establish innovation hubs here. Eg: Bosch established a smart manufacturing and AI innovation centre in Bengaluru as part of its India-based GCC.
What policy steps support GCC growth in India?
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What are the challenges?
- Talent saturation in Tier-1 cities: Intense competition for skilled tech professionals increases costs. Eg: In Bangalore, GCCs like Walmart Global Tech and Goldman Sachs compete for the same AI/ML talent pool, pushing up salary levels and attrition.
- Infrastructure gaps in Tier-2 cities: Poor connectivity, weak urban infrastructure, and limited office space deter expansion. Eg: Despite interest in Nagpur for cost-effective operations, Deloitte limited its operations due to lack of reliable internet and skilled ecosystem.
- High attrition rates: Rapid job-switching among mid-career professionals disrupts continuity. Eg: JPMorgan Chase’s GCC in Hyderabad faced over 22% attrition in 2023, especially among cybersecurity analysts.
- Regulatory & compliance hurdles: Navigating data protection and labor laws adds to legal burden. Eg: Meta’s GCC in Gurugram had to rework its data storage policies post the DPDP Act, 2023, causing operational delays.
- Limited R&D ownership: Indian GCCs often do not drive core product innovation. Eg: While Apple’s Bengaluru GCC handles app testing, core iOS design decisions remain with teams in California.
Way forward:
- Promote Tier-2 city readiness: Improve digital infrastructure, urban planning, and talent development in emerging tech hubs like Coimbatore, Indore, and Kochi through targeted government-industry partnerships.
- Encourage innovation and R&D ownership: Provide tax incentives, faster IP approvals, and create collaborative platforms with academia to help GCCs move beyond support roles to core product development.
Mains PYQ:
[UPSC 2024] The West is fostering India as an alternative to reduce dependence on China’s supply chain and as a strategic ally to counter China’s political and economic dominance.’ Explain this statement with examples.
Linkage: The UK wants better access to India’s fast-growing digital economy and aims to strengthen its global services presence. India is becoming more important in global supply chains, especially in digital services and transformation, where Global Capability Centres (GCCs) play a key role.
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