Business

India’s Tier-II, III Cities Emerge As Hotspots For Global Capability Centres

India’s tier-II and tier-III cities are rapidly emerging as promising hubs for Global Capability Centres (GCCs), driven by a mix of government initiatives, state-level incentives, and a robust ecosystem of enablers.

Experts believe this shift is set to promote inclusive growth, generate employment beyond traditional metropolitan centres, and ease infrastructure pressure on tier-I cities.

As of FY24, India hosts over 1,700 GCCs, with approximately two new centres established every week. The sector generates $64.6 billion in revenue and employs around 1.9 million people, with over 82,000 jobs located in smaller cities.

Government Push and Policy Support

In the Union Budget, the central government announced a dedicated framework aimed at guiding states to promote GCCs in tier-II locations.

The framework focuses on improving talent and infrastructure availability, reforming local bylaws, and fostering industry collaboration.

Electronics and IT Minister Ashwini Vaishnaw recently stated that the government is working on a detailed roadmap to boost GCC’s presence in smaller cities.

The Centre is conducting a ‘mapping’ exercise to identify potential industry-academia partnerships and is exploring a unified portal to streamline permissions for GCCs.

States are also stepping up. Tamil Nadu offers payroll subsidies for high-paying GCC jobs, while Karnataka encourages expansion into cities like Mysuru, Mangaluru, and Hubballi-Dharwad.

Uttar Pradesh has implemented a GCC policy, offering recruitment subsidies and R&D incentives.

Tier-I Cities Lead, While Smaller Cities Close the Gap

Tier-I cities such as Bengaluru, Hyderabad, and Chennai remain the primary bases for GCCs.

However, tier-II and III cities now account for 7% of India’s GCCs in 2024, up from 5% in 2019. Deloitte partner Rohan Lobo observed a convergence of trends, mid-sized global firms choosing India as a delivery location, and emerging cities drawing increasing GCC interest.

While many mid-market firms initially prefer the established ecosystems of tier-I cities, the rising potential of distributed operations in smaller centres is drawing attention.

According to a Nasscom-Zinnov report, digitally skilled talent in tier-II cities grew by over 25% in two years. Attrition rates in these locations are 20–30% lower than the 15.2% observed in tier-I hubs.

Companies also save around 25% on operational costs, including real estate and employee compensation.

Synopsys, for example, has set up a GCC in Bhubaneswar. “Hubs in cities like Bhubaneswar create new opportunities for engineers and support our global R&D efforts,” said Rituparna Mandal, VP at Synopsys.

The centre collaborates with IIT Bhubaneswar and supports long-term investment due to manageable living and operating costs.

Global firms are decentralising innovation by expanding into smaller cities. Mastercard’s GCC in Vadodara employs nearly 400 professionals and contributes to key platforms like MDES and the Carbon Calculator.

“Emerging hubs are not just cost centres—they are strategic growth platforms,” said Rajesh Mani, SVP at Mastercard. Similarly, global engineering companies have established R&D hubs in cities like Nashik and Vadodara, tapping into regional industry clusters.

A U.S.-based SaaS provider found rapid team ramp-up and better retention by establishing its offshore centre in Mysuru, while firms in Coimbatore and Salem are pioneering automation and digital workflows.

Challenges Remain for Emerging Cities

Despite the momentum, several challenges persist. Mastercard’s Mani pointed out that many smaller cities still face cloud infrastructure gaps, limited startup ecosystems, and weaker R&D capabilities.

Issues like patchy high-speed internet, lack of cloud-ready data centres, and regulatory uncertainty also hinder scalability.

Industry stakeholders are urging reforms such as rationalising safe harbour margins in transfer pricing and developing plug-and-play infrastructure to simplify the setup process for new GCCs.

Also Read: Steady As She Goes: India’s Economy Shows Cautious Optimism For FY26

Purnima Mishra

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