The GCC Playbook: Why Karnataka is India’s Leading GCC Magnet

Karnataka stands as a beacon of innovation, hosting a thriving ecosystem of esteemed Global Capability Centers (GCCs) that lead India’s GCC landscape. The state boasts the largest share of the country’s GCC talent, with a significant portion of India’s workforce contributing to its dynamic economy. Karnataka’s GCCs play a crucial role not only in generating employment but also in fostering cutting-edge developments across technology, finance, and business services, making it a preferred destination for global enterprises seeking to establish their operations in India.

• Number of GCCs: Karnataka hosts over 500 GCCs, accounting for roughly one-third of all GCCs in India. This concentration reflects the state’s attractiveness to global enterprises, which see it as an ideal location for establishing operations that support core business functions, such as technology, finance, and customer support.

• GCC Workforce: Karnataka’s GCCs employ approximately 35% of the country’s total GCC workforce, highlighting the state’s significant share of India’s skilled talent pool. This workforce includes top engineers, financial analysts, and technology experts, many of whom are drawn to Bengaluru’s reputation as a tech hub. The state’s ability to continually attract and retain such talent further strengthens its appeal to global companies looking to establish and expand their GCCs.

• Economic Output: GCCs contribute around $22.2 billion annually to Karnataka’s economy, reflecting the substantial impact of these centers on the state’s GDP and overall economic growth. This economic contribution underscores the value that GCCs bring not only through direct job creation but also through associated services, infrastructure development, and technology advancements. This substantial economic output further reinforces Karnataka’s position as a leader in India’s digital economy.

• GCC sectors: Karnataka has a large number of GCCs in the BFSI and FMCG sectors. For example, 33% of GCCs for BFSI companies like Goldman Sachs and JP Morgan Chase are in Karnataka. 42% of GCCs for FMCG companies like Target, Walmart, and Unilever are in Karnataka.

The state’s dominance is evident in its staggering share of India’s GCC presence, Karnataka is home to over 50% of the country’s GCCs. Karnataka, particularly Bengaluru, has become a magnet for Global Capability Centers (GCCs) for several strategic reasons:

1. Established Technology and Talent Hub
   Bengaluru, is widely regarded as India’s “Silicon Valley.” Major tech companies and startups alike are based here, creating a rich ecosystem for talent acquisition, innovation, and industry growth.
2. Cost Efficiency for Multinationals
   India’s proven cost efficiencies have consistently attracted multinationals to transition significant internal processes to India particularly Karnataka. This cost efficiency is further enhanced by state policies that offer tax breaks, infrastructure subsidies, and other incentives for foreign investors, making Karnataka a favourable destination for multinational companies.
3. Innovation and Research Focus
   Many GCCs in Karnataka focus on innovation, product development, and high-value R&D functions. With access to some of India’s top engineering and technology institutions, including the Indian Institute of Science (IISc) and various IITs, Karnataka provides GCCs with a strong research ecosystem. The ability to innovate and quickly develop products & solutions attracts GCCs looking for cutting-edge advancements in technology, engineering, and software.
4. Mature Ecosystem for GCCs
   Over the past few decades, Karnataka has developed a mature ecosystem for GCCs, with established players in IT services, finance, R&D, and engineering sectors. This presence creates a network effect where companies benefit from proximity to other multinationals, industry best practices, and collaborations within a well-developed professional ecosystem.
5. Skilled Talent Pool
   Karnataka, particularly Bengaluru, has a highly skilled workforce in technology, engineering, finance, and research & development. The presence of top educational institutions and a large number of engineering and business graduates each year strengthens the talent base.
6. Quality of Life
   Bengaluru’s cosmopolitan lifestyle, pleasant climate, and multicultural ambiance make it an inviting city for foreign professionals. This environment fosters a smooth transition for those relocating from abroad, supporting GCCs that rely on talent mobility and cross-cultural teams. The city’s blend of modern amenities, diverse communities, and recreational options provides a comfortable and enriching experience for professionals, enhancing its appeal as a preferred destination for global business operations.

Karnataka’s Information Technology and Biotechnology Minister, Priyank Kharge, unveiled the state’s first dedicated Global Capability Centres (GCC) Policy for the period 2024-2029, to drive economic decentralization and position the entire state as a global GCC hub. Policy features include:

In order to decentralize growth and ease the burden on Bengaluru, the policy encourages GCC establishments in secondary cities such as Mangaluru, Mysuru, Hubballi-Dharwad, Belagavi, Kalaburagi, Tumakuru, and Shivamogga. By developing these regions into business hubs, the initiative aims to distribute economic activities across Karnataka, offering investors new locations with emerging talent pools and lower operational costs.

Incentives to attract Investments:

The policy offers several incentives to make regional cities attractive for GCC investments, including:

• Rental Reimbursements: GCCs operating in the ‘Beyond Bengaluru’ areas can receive reimbursements on rental costs, helping them reduce initial operational expenses.
• EPF Contribution Reimbursement: Companies will receive reimbursements on Employees’ Provident Fund contributions for newly hired employees, lowering hiring costs.
• Electricity Duty Exemptions: Eligible companies in targeted cities will enjoy a five-year exemption from electricity duty, reducing overhead costs and promoting sustainable, cost-effective operations.
• Grants for R&D: Infrastructure development grants are available to support research and development centers in regional cities, encouraging innovation and local job creation.
• Support for Nano GCCs: Special provisions exist for small GCCs (5-50 employees), often nano-GCCs, with incentives aimed at encouraging small to medium enterprises in emerging tech fields.
• Skill Development Grants: The policy includes grants for local training programs, ensuring a skilled workforce for GCCs in regional cities, and supporting Karnataka’s goal of becoming a tech-talent hub.

Infrastructure and Skill Development:

• Skill Training Programs:
  The policy commits to upskilling 1 lakh professionals in cutting-edge areas like artificial intelligence, big data, cloud computing, and cybersecurity. This initiative aims to build a technically proficient workforce that can meet the demands of GCCs.
• Infrastructure Investment:
  Investment in infrastructure includes the establishment of IT parks, business hubs, and improved transport connectivity in targeted cities. The government’s Single-Window Clearance system and streamlined compliance processes make it easier for businesses to set up and operate in Karnataka, minimizing bureaucratic delays and enhancing business efficiency.

Thus, for foreign companies, Karnataka’s GCC policy offers direct benefits aimed at cost savings and operational efficiency. To summarize, Key incentives include tax breaks, duty exemptions, and financial rebates designed to reduce setup and operational costs for GCCs. The policy also ensures a streamlined regulatory environment, providing single-window clearances and fast-tracked approvals to minimize bureaucratic delays, allowing foreign companies to establish their operations swiftly and efficiently.

Astravise Services excels in setting up and managing Global Capability Centers (GCCs) in India, providing organizations with a competitive advantage in operational efficiency, cost optimization, and business scalability. Our seasoned expertise enables us to establish fully functional GCCs tailored to meet the unique needs of each client, helping them harness the advantages of local talent, infrastructure, and streamlined operations. From planning and regulatory compliance to recruitment and operational management.

Our leadership team brings a wealth of experience in guiding companies through complex GCC operations, emphasizing both agility and strategic foresight. Our goal is to empower businesses with a solid foundation in the GCC space, enabling them to thrive in diverse markets while leveraging our deep understanding of regional dynamics and compliance frameworks.

For more details about the Global Capability Centers (GCC) connect and follow our Director, Mr. Srinivas Chintada.