Beyond Metros: The Rise of Indian GCCs in Tier II Cities

As India cements itself as the  world’s preferred destination to set up global capability centers, the rise of tier-2 cities would be a defining force. Studies have found that approximately 150 GCCs are currently located in tier-2 cities.  Further, a 30% – 40% GCC demand is expected in these areas in near future. So, companies, especially startups and mid-sector firms, must start seeing beyond the traditional tier-1 cities and seize untapped opportunities lying elsewhere for scalable and sustainable solutions. Read on.

GCCs in Tier-2 cities are currently in a mature phase exploring new markets to offer unmatched value-proposition across all industries. They are offering a confluence of infrastructural, economic, and technological advancements which is highly attractive to global enterprises.  Here’s a detailed look into why they are booming.

State governments are encouraging several organizations to establish their GCCs in Tier-2 cities with schemes and policies that are in the best interest of businesses. For instance, Karnataka Global Capability Center (GCC) Policy 2024 aims to set up 500 new GCCs thus attracting $50 billion in economic output. Under this, the ‘Beyond Bengaluru’ section aims to spread growth and innovation across tier 2 cities like Mangaluru and Mysuru to foster a tech ecosystem. 

The Indian government is also proactively developing tax incentives in tier-2 and tier-3 cities along with a single process clearance for foreign investment approvals. Further, GIFT City (Gujarat International Finance Tec-City), which is India’s first international financial services center, is provided with GST exemptions and tax breaks to make it a lucrative destination for setting up global capability centers.

Several tier-2 cities have established superior tech parks that are slowly yet steadily emerging as GCC hotspots. Here’s a small list for better understanding:

• Jaipur – Mahindra World City, Sitapura IT Park, and Mansarovar IT Park
• Chandigarh – QuakCity IT Park, Mohali IT City, and RGCTP
• Indore – Crystal IT Park, Super Corridor IT Hub, and TCS SEZ Indore
• Mysuru– L&T Tech Park and Hebbal IT Park
• Nagpur – MIHAN-SEZ IT Park and STPI 

Tier-2 cities like Coimbatore, Bhubaneshwar, Jaipure, and  have also witnessed the rise of Special Economic Zones (SEZs)  with tax incentives, talent availability, relaxed regulations, and low operational costs which further support Indian GCCs.

It is an undeniable fact that tier 2 cities are equivalent to cost efficiency. They offer 35% lower operational expenses when compared to the high-tech metros without compromising on the quality and efficiency of business functions. But why exactly are these cities cheaper?

Well, this is typically due to the simple lifestyle, affordable utilities, and fairly-priced infrastructure which helps reduce salary burdens. Residents of Tier-2 cities typically face lower expenses in terms of food, accommodation, transport, and daily needs. This has drastically reduced the demands for high salary packages. 

Altogether, these have helped global captive centers save big and invest in innovation, R&D, and employee upskilling and training. Further, they can also hope for higher profit margins which ultimately encourage the parent company to scale operations in other locations.

Cities like Jaipur, Chandigarh, Coimbatore, Vadodara, GIFT City, Indore, and Nagpur, driven by a skilled talent pool, and infrastructure support  are emerging as rising stars in terms of GCC development. Big names like Genpact, TCS, Wipro, Bosch, Impetus, Deloitte, Cognizant, and HSBC have strong presence here since the companies have recognized the immense potential of these non metro regions. Strong government push for IT development, improved connectivity with airports and highways, impressive education landscape, AI initiatives fostering GCCs from several sectors across multiple industries.

Further, these cities also boast a rapidly growing startup and fintech sector, rapid digital infrastructure expansion, and emerging AI & semiconductor research hubs are further catalyzing the growth of offshore development centers especially in the BFSI and engineering sectors of the USA, UK, UAE, and European countries.