Global Capability Centers in Tier 2 Cities: The Untapped Advantage

The Global Capability Centers (GCCs) in Tier 1 cities like Bengaluru, Hyderabad, and Pune are at the forefront. However, now GCC Tier 2 cities such as Coimbatore, Indore, Bhubaneswar, Jaipur, and Chandigarh have a quiet revolution. As the talent, real estate, and infrastructure are intensifying in metros, multinational companies are now considering Tier 2 locations as the next front for development.

GCC in Tier 2 cities was considered less viable due to the alleged boundaries in infrastructure and connectivity. But this story is changing rapidly. The rise of remote work, better digital infrastructure, government-backed GCC policies, and increasing talent pools from local engineering colleges are promoting a new wave of GCC expansion in small towns. These cities are no longer only back-office destinations; they are developing as fit centers for data analytics, R&D, software engineering, and customer experience operations.

As companies are adopting the GCC 3.0 model, where price creation and innovation are being preferred, Tier 2 cities in India are emerging as strategically competent. This blog explains why these cities represent unused benefits in the global expansion of GCC in India.

GCC in India

India has over 1,800 global capability centers, with more than 1.9 million professionals. Initially, these centers were established for cost optimization and have developed into high-value centers of excellence. According to Nasscom, about 50% of the new GCCs between 2021 and 2024 established their operations in Tier 2 cities.

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Tier 2 Cities are Gaining Momentum in Global Capability Centers in India

Here is a table explaining why Tier 2 cities are gaining momentum in global capability centers in India.

Advantage	Description
Lower Operating Costs	Real estate and salary costs are 30-40% lower than Tier 1 cities
Access to Fresh Talent	Over 2 million graduates annually from Tier 2 and Tier 3 city colleges
Better Retention Rates	Employees from home towns are more likely to stay longer
Growing Infrastructure	Smart City initiatives and IT parks improving connectivity and amenities
Government Support	State-specific GCC policy frameworks offer tax and land benefits

Opportunities in Various Sectors

The BFSI firm is taking advantage of Tier 2 locations for regulatory technology and customer analysis.
Healthcare GCC uses Tier 2 cities for clinical data management and medical coding.
Retail and e-commerce catalogs take advantage of local teams for management, UI/UX and chat support.
Engineering R&D and product tests are also gaining momentum in low-cost Tier 2 innovation centers.

GCC Government Policies Promoting Expansion

Many state governments are actively initiating policies for the GCC expansion in their states. Here is the list of the states with the details of their gcc policies and the benefits.

State	Policy/Initiative	Cities Covered	Key Benefits
Andhra Pradesh	IT Policy, GCC incentives	Vizag, Vijayawada	Plug-and-play infrastructure, land at subsidized rates, tax exemptions
Uttar Pradesh	IT & Startup Policy 2020	Lucknow, Kanpur, Varanasi	100% stamp duty exemption, interest subsidies, training reimbursement
Odisha	Odisha Electronics & IT Policy	Bhubaneswar	Capital subsidies, interest subvention, training incentives
Tamil Nadu	Tamil Nadu IT Policy 2021	Coimbatore, Madurai, Tiruchirappalli	Rental subsidies, EPF reimbursement, stamp duty waivers
Rajasthan	Rajasthan Startup & IT Policy	Jaipur, Udaipur	Financial assistance for IT parks, incentives for women entrepreneurs
Madhya Pradesh	MP IT/ITES Policy	Indore, Bhopal	Land rebates, power tariff incentives, skilling support
Telangan	IT Policy (with focus on Beyond Hyderabad)	Warangal, Karimnagar, Nizamabad	Special packages for Tier 2 cities, infrastructure development, hiring support
Karnataka	Beyond Bengaluru Initiative	Mysuru, Mangaluru, Hubballi-Dharwad	25% capex subsidy, mentorship for startups, faster approvals
Kerala	Kerala IT Policy & Tech Innovation Zones	Kochi, Kozhikode	Ready-to-move IT parks, land at concessional rates, investor-friendly reforms
Punjab	Punjab Industrial & Business Development Policy	Mohali, Amritsar	Capital subsidies, GST reimbursement, power tariff support
Central Govt	Digital India, Skill India, Startup India	All Tier 2/3 cities across India	National digital infrastructure, job readiness programs, innovation support

Case Studies: Successful GCC in Tier 2 cities

Walmart Global Tech expanded his growing data to Bhubaneswar for the science team.
HCL TECH’s “New Wistas” program has established centers in Nagpur, Madurai, and Lucknow.
Cognizant and Infosys have strengthened operations in Kochi and Trivandrum, providing global IT services from these emerging centers.

These examples underline that Tier 2 is not a compromise; they are strategic additions for global operating models.

Challenges

The availability of mid-sector talent is still less than in the Tier 1 cities.
Issues related to global performance and brand identity.
Need better urban infrastructure in some areas.

However, these challenges are being resolved through hybrid work models, rotational programs, and strong skill participation.

Tier 2 GCC's Future in India

As the GCC 3.0 model is becoming the new normal, companies require distributed, flexible, and innovation-focused operations. Tier 2 cities provide a unique mixture of strength, talent, and agility. With the importance of ESG goals, inclusion, and work-life balance, these small cities offer better employee value propositions.

Conclusion

GCC in India has entered a transformational phase, and Tier 2 cities are the next big story. These cities are no longer a cost-saving option—they are vibrant ecosystems where global enterprises can promote innovation, reach new talents, and create long-term values. As more firms adopt decentralized models, Tier 2 will play an important role in shaping the future of GCC operations in India.

To take full advantage of this unused profit, businesses must reconsider location strategies, connect with local governments, and make inclusive talent models. With correct investment, Tier 2 cities can initiate a new era of innovation distributed to global capacity centers in India.

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Unlock Growth Beyond Metros with Inductus GCC. We provide end-to-end services to take advantage of the power of Tier 2 cities. From talent sourcing to infrastructure and compliance, we handle all this and help you to scale efficiently, reduce the cost, and promote innovation.

frequently asked questions (FAQs)

Why are businesses interested in Tier 2 cities in India for the GCC?

As Tier 2 cities provide better infrastructure, reduced costs, access to local talent, and better retention rates for staff, businesses are becoming interested in them.

Do Tier 2 cities have any particular government initiatives that favor GCC?

Yes, some states like Telangana, Uttar pradesh, Andhra Pradesh, and Tamil Nadu offer the incentives, like tax breaks, subsidies, and plug-and-play facilities.

How does the Central Government support Tier 2 cities to establish the GCC?

The Central government is providing many schemes to small Indian cities, like Digital India, Skill India, and Startup India, to promote digital infrastructure & employment readiness.

What is the advantage of recruitment in Tier 2 cities of India in GCC?

Firms benefit from a loyal workforce, low cost of living, and access to more than 2 million graduates annually from regional institutions.

Is Tier 2 GCC in India the model for long-term sustainability?

Yes. Digital adoption with hybrid function models and ESG goals provides sustainable, future-ready options for Tier 2 GCC global enterprises.

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Aditi

Aditi, with a strong background in forensic science and biotechnology, brings an innovative scientific perspective to her work. Her expertise spans research, analytics, and strategic advisory in consulting and GCC environments. She has published numerous research papers and articles. A versatile writer in both technical and creative domains, Aditi excels at translating complex subjects into compelling insights. Which she aligns seamlessly with consulting, advisory domain, and GCC operations. Her ability to bridge science, business, and storytelling positions her as a strategic thinker who can drive data-informed decision-making.