India’s Global Capability Centres (GCCs) have become force in the country’s IT and services exports by 2025. Nearly 1,600 GCCs operate across multiple sectors including finance, retail, electronics, and automotive. These centres handle diverse functions such as design, supply chain management, data analysis, and software development. However, the rapid growth of GCCs presents both opportunities and challenges for India’s traditional IT services sector.
Rise of Global Capability Centres in India
India hosts nearly 20 per cent of the world’s chip designers and major multinational companies have established GCCs here. Amazon’s largest global back office is in Hyderabad, while Goldman Sachs employs part of its workforce in Bengaluru and Hyderabad. GCCs now contribute close to 40 per cent of India’s services exports, second only to IT services. This growth is driven by India’s large engineering talent pool, lower labour costs, affordable real estate, and flexible labour laws.
Overlap Between GCCs and IT Services
GCCs and Indian IT service firms often perform similar outsourced tasks. Most GCC work is still considered replaceable and focused on cost efficiency rather than innovation. Few GCCs engage in high-end, non-outsourcable work that generates intellectual property (IP) within India. This overlap raises concerns about the impact of GCCs on domestic IT companies and the quality of jobs created.
Concerns Over Job Quality and Innovation
Policy makers worry that many GCC roles do not require highly specialised skills. Some GCCs hire science graduates instead of engineers to reduce costs. There is a lack of cutting-edge patents or senior technology leadership based in India. The challenge is to upgrade GCC work to more strategic, IP-generating activities that are difficult to relocate and add lasting value to the economy.
Impact of Artificial Intelligence and Future Risks
The rapid adoption of artificial intelligence threatens traditional IT and GCC roles that rely on fungible skills. Recent large-scale layoffs in major IT firms show the sector’s struggle to adapt. Without innovation and skill enhancement, both GCCs and IT companies risk losing global competitiveness. A shift towards becoming a ‘product nation’ with a focus on IP creation is seen as essential for long-term growth.
Government Initiatives and Policy Directions
The Government of India is encouraging localisation of design, manufacturing, and IP within the country. New incentive schemes for chip design mandate companies to vest some IP rights with Indian entities. This aims to ensure that India benefits from technology advancements and reduces dependency on cost arbitrage. The policy focus is on upgrading skill sets, encouraging innovation, and making GCCs core to multinational companies’ global strategies.
Comparisons and Strategic Implications
India’s GCC growth is often compared to China’s manufacturing rise. Just as China faced backlash for its dominance in hardware, India may face similar challenges in services. The key to avoiding this lies in creating unique capabilities and IP that cannot be easily replicated elsewhere. Balancing GCC expansion with the health of domestic IT firms is critical to sustaining India’s global leadership in technology services.
Questions for UPSC:
- Taking example of India’s Global Capability Centres, discuss the impact of outsourcing on domestic IT industries and economic growth.
- Examine the role of intellectual property rights in promoting innovation within emerging economies like India’s technology sector.
- Analyse the challenges and opportunities presented by artificial intelligence for the Indian IT services sector. How should policy adapt to these changes?
- Discuss in the light of India’s experience, the strategic importance of balancing foreign direct investment and domestic industry growth in the technology sector.
