GCC's in India with a Spotlight on Karnataka

(Please note that this was originally published on 03.12.2024)

This piece aims to give a structured overview of Global Capability Centres (GCCs), beginning with their conceptual foundation and evolution, before examining their economic significance in India and, more specifically, the policy-driven ecosystem emerging in Karnataka.

With regard to the Policy in Karnataka, this note outlines the practical incentives, policy initiatives, and strategic advantages associated with establishing Global Capability Centres (GCCs) in India, with a focus on the tangible benefits offered by Karnataka’s regulatory framework and ecosystem support.

What is a GCC?

Bangalore, often hailed as the Silicon Valley of India, became a focal point for technological transformation during the late 1990s and early 2000s. This era marked the advent of Global Capability Centers (GCCs) as global multinational corporations began setting up operations in Bangalore and other Indian cities.

Initially, GCCs, also referred to as Global In-house Centers (GICs) or Captive Centers, were established as a cost-saving mechanism that enabled companies to execute back-office functions and operational support at significantly lower expenses than in Western nations.

In its essence, a GCC refers to offshore internal units of MNCs that operate across the globe and are set up with the purpose of providing cost-effective operational support to foreign entities.

While the terms Global Capability Centers (GCCs) and Global In-House Centers (GICs) are often used interchangeably to describe capacity centers established by multinational corporations (MNCs), it is important to note that only specific categories of these centers qualify as a "GIC" under the ‘International Financial Services Authority (Global In-House Centres) Regulations, 2020’ - GIC Regulations.’

A significant trend in India’s GCC landscape is the evolution of GCCs into Global Innovation Centers (GICs). These centers are transitioning from their traditional cost-saving roles to prioritize core transactions and innovation, often serving as hubs for specialized development. This transformation is fueled by the rising need for speed, resilience, and access to skilled talent.

Furthermore, smaller GICs are emerging as scaled-down versions of their parent GCCs. These centers not only handle core functions but also drive innovation. As they progress, these smaller GICs are expected to adopt more multifunctional roles, gradually matching the capabilities of their tier-1 counterparts.

GCCs are poised to play an increasingly pivotal role in shaping the global business and economic landscape for multinational corporations.

GCCs and the Indian Economy

Although the term GCCs gained prominence only in recent decades, it can be considered to be an evolution of the concept of Offshore Development Centers (ODC).

The expansion of ODC and the rise of GCC have had a profound impact on India, driving employment generation, enhancing the quality of education and skill development, and contributing substantially to the nation’s economic growth.

As of March 2024, India’s Global Capability Centers (GCCs) have firmly established themselves as a global powerhouse, generating annual revenues of $64.6 billion—a nearly double-digit growth rate (9.8%) between FY2019 and FY2024.

This growth has been driven significantly by the Engineering, Research, and Development (ER&D) sector, which accounts for over half of this revenue ($36.4 billion).

These advancements have culminated in the establishment of 2,975 GCC units and 1,700 unique GCC entities, employing over 1.6 million professionals.

With India contributing to more than half of the global GCC market, the nation has solidified its position as the preferred destination for these centers

India’s strategic advantage lies in its vast STEM talent pool, which accounted for 32% of global GCC talent in FY2024—up from 24% in FY2019.

The country has also seen significant growth in leadership and specialized roles, such as product management and architectural design, with one-third of global engineering activities now centralized in India.

The average GCC in India has expanded its workforce by 24% over the last five years, employing approximately 1,130 people per center.

India's expertise in advanced technologies is another cornerstone of this growth, with 120,000 professionals specializing in AI/ML and over 500 AI/ML-enabled GCCs driving global innovation. Additionally, 185 GCCs have established dedicated AI/ML Centers of Excellence (CoEs).

With projections suggesting a workforce surpassing 2.5 to 2.8 million and a market size exceeding $100 billion by 2030, India’s GCCs are poised to further elevate their contributions to the global economy and supply chain.

As of date, Karnataka is the only state in India to have a specific GCC policy which shall be dealt later in this memo.

The Governments of Uttar Pradesh and Maharashtra are expected to join the ranks while it is also speculated that Ministry of Electronics and Information Technology is set to create a separate legislation for the same.

GCCs and Karnataka

As India emerged as the preferred global destination for Global Capability Centers (GCCs), Karnataka, particularly Bengaluru has solidified its status as the epicenter of this transformation.

Bengaluru houses over 30% of India’s GCCs and employs 35% of the country’s GCC workforce, making it the dominant hub for these centers.

Recognizing this transformation, Karnataka recently became the first Indian state to announce a dedicated GCC policy during the Bengaluru Tech Summit in 2024 with the state being committed to creating and fostering a thriving ecosystem for GCCs by addressing challenges related to setup and operations, enabling seamless functionality and enhancing global competitiveness.

It focuses on establishing three Global Innovation Districts in Bengaluru, Mysuru, and Belagavi amongst other districts such as Shivamogga and Chikamagalur with cutting-edge infrastructure and incentives to support GCCs beyond Bengaluru

The vision behind the policy

The policy sets ambitious targets for 2029, including attracting 500 new GCCs, thereby reaching a total of 1,000 GCCs in the state. This expansion is expected to create 3.5 lakh new jobs and drive an economic output of $50 billion.

The policy is focused and curated based on workforce diversity, sustainable practices, and technological leadership with the intention of retaining the state as a preferred destination for GCC investments.

The policy emphasizes workforce empowerment by promoting lifelong learning, upskilling, and reskilling initiatives to maintain its competitive edge in innovation. It also seeks to enhance workforce diversity through targeted mentorship programs for women and comprehensive support mechanisms for transgender employees.

Flexible work models, including remote and hybrid arrangements are also encouraged.

Sustainability and ethical governance are also integral to the policy. It aims to lead in green initiatives, ESG compliance, and digital transformation, setting benchmarks for responsible business practices.

The policy also aspires for the state to become a global leader in Artificial Intelligence (AI), focusing on creating a comprehensive AI R&D ecosystem and fostering advancements in deep-tech and emerging technologies.

To ensure the success of these initiatives, the policy creates an investor-friendly business environment with frameworks to simplify GCC establishment and expansion. Platforms to facilitate collaboration between GCCs and the local innovation ecosystem further strengthen the state’s appeal as a destination for cutting-edge research and development.

Incentives of the Policy

The Karnataka Government’s comprehensive policy framework for Global Capability Centres (GCCs) includes a wide range of incentives, structured around skilling, infrastructure development, innovation, and fostering local ecosystems.

In this section, I will list out the key incentives offered by the policy and in the later sections, I shall deal with them in detail.

For ease of reference, the key incentives under the policy may be categorised as follows

Summary of Incentives under the Karnataka GCC Policy

■ Talent & Workforce   ■ Innovation & R&D   ■ Financial / Tax   ■ Infrastructure & Operations   ■ Ecosystem Support

Incentive	Details	Eligible Entities
Internship Reimbursement	50% stipend reimbursement up to INR 5,000/month	All GCCs
Skilling Reimbursement	20% reimbursement with caps	GCCs (100+ employees)
Leadership Development	Funding and grants for leadership training	All GCCs
Innovation Labs / CoEs	Up to 40% capex (INR 4–5 crore)	GCCs
Startup Use of GCC Labs	100% reimbursement (up to INR 40 lakh)	Startups + GCCs
Innovation Challenges	Funding up to INR 1.5 crore	GCCs
Patent Filing Incentive	50% reimbursement	GCCs
Quality Certification	50–80% reimbursement	GCCs
Property Tax Reimbursement	30% for 3 years	Beyond Bengaluru GCCs
EPF Contribution	Up to INR 3,000/month per employee	New GCCs
Rental Assistance	Up to 50% reimbursement	GCCs (100+/500+ employees)
Internet Cost Reimbursement	25% for 3 years	New GCCs (Beyond Bengaluru)
Electricity Duty Exemption	100% exemption (5 years)	Beyond Bengaluru GCCs
Industrial Power Tariff	Switch from commercial tariff	GCCs
R&D Infrastructure Grants	Up to INR 50 crore	Select GCC projects
Co-working Space Support	Vacancy reimbursement over 3 years	Real estate entities
Academic Curriculum Funding	Per student/faculty funding	Academic institutions
Applied Research Funding	50% funding	GCCs + academia

Delving in detail;

For any new or existing GCCs in the state

The Karnataka Government's incentives for Global Capability Centres (GCCs) focus on fostering innovation, collaboration, and skill development. Here's a summary of the key offerings:

• Internship Reimbursement: The government provides 50% reimbursement of the internship stipend, up to INR 5,000 per month, for a maximum of 20,000 interns annually.
• Skilling Local Talent: Employers can avail of reimbursement for 20% of skilling expenses, capped at INR 36,000 for graduates and INR 18,000 for diploma holders.
• Global Leadership Development: Financial assistance and support for leadership training programs aim to upskill high-potential employees, fostering global competencies.
• Common Platform for Collaboration: A matchmaking platform connects industry and academia to encourage partnerships and innovation.
• Utilization of GCC Labs and Technology: Startups can receive a 100% reimbursement for costs incurred in using GCC facilities, with a cap of INR 40 lakh per GCC.
• Innovation Labs/CoEs: The government funds up to 40% of the capital expenditure, up to INR 4 crore, for setting up labs or Centres of Excellence in Bengaluru Urban District.
• Innovation Challenges: GCCs solving public service challenges through innovative solutions can receive funding of up to INR 1.5 crore.
• Hosting Events and Conferences: Funding covers one-third of hosting costs, capped at INR 25 lakh.
• Intellectual Property Incentive: The government reimburses 50% of domestic patent filing fees, up to INR 2 lakh.
• Quality Certification Financial Assistance: Reimbursement of 50% of certification fees, up to INR 6 lakh.
• Connectivity Approvals: Right-of-way applications for cables, towers, and antennae will be processed within 30 working days.
• GCC Incentive Clinic: A dedicated helpdesk for addressing GCC-specific requirements and challenges will be established.

For New or Existing GCCs:

• Innovation Labs/CoEs:
  • Funding up to 40% of capital expenditure, capped at INR 5 crore for clusters in Beyond Bengaluru.
• Cluster Anchor Groups:
  • Formation of groups to support matchmaking for GCCs in six key Beyond Bengaluru clusters.
• Property Tax Reimbursement:
  • 30% reimbursement on property tax for three years.
• Intellectual Property Incentive:
  • 50% reimbursement of patent filing fees, capped at INR 3 lakh.
• Quality Certification Financial Assistance:
  • Reimbursement of 80% of certification fees, up to INR 8 lakh.

For GCCs with a Minimum of 100 Employees:

• Recruitment Assistance:
  • 50% reimbursement of recruitment costs, capped at INR 7 crore.
• Rental Assistance:
  • Reimbursement of rent expenses, up to 50% and capped at INR 2 crore.
• Strengthening R&D Infrastructure:
  • Grants of up to 40% or INR 50 crore for developing R&D facilities.

• EPF Contribution Reimbursement (FOR NEW GCCs):
  • Up to INR 3,000 per employee per month for two years for new employment.
• Telecom Infrastructure Development (FOR NEW GCCs):
  • Reimbursement of 25% of internet expenses for three years.

For Academic Institutions:

• Skilling Curriculum:
  • Funding for industry-relevant course development at INR 10,000 per student and INR 20,000 per faculty, capped at INR 1 crore.
• Joint Research:
  • 50% funding of research budgets, up to INR 75 lakh, and INR 1 crore for projects involving two institutions.

For Real Estate Entities:

• Co-Working Spaces:
  • Reimbursement of vacant seat costs for three years.
• GCC Immersive Hubs (For Registered Entities or Industry Associations):
  • Support for setting up immersive hubs to showcase innovation and R&D in the state under a Public-Private Partnership (PPP) model.

Strategic Initiatives of the Policy

With the vision of establishing Karnataka as a global innovation hub clearly articulated, the policy outlines a comprehensive, multi-faceted strategy to bring this vision to life.

By combining targeted incentives, regional development initiatives, and robust support systems, the policy ensures that every aspect of the GCC ecosystem.

While I have previously listed out the incentives, to deal with the initiatives individually,

Global Innovation Districts

The policy mentions that the government is setting up three new technology parks, referred to as Global Innovation Districts, with one located in Bengaluru and two in areas Beyond Bengaluru.

These innovation districts aim to bolster connectivity and provide cutting-edge infrastructure, including high-speed internet and reliable power, adhering to global sustainability standards.

Key highlights from the policy with regard to these districts include:

• Creation of a collaborative ecosystem involving startups, tech leaders, and academic institutions supported by skilled talent from nearby universities.
• Streamlined regulatory processes and a focus on fostering research and development for investors.
• Coordination offices in each district to facilitate seamless interaction between GCCs and the government.
• Special incentive packages for companies establishing their GCCs as Anchor Investors in Beyond Bengaluru areas.
• Tailored incentives for Mega Projects based on job creation.

Further, The Government of Karnataka has structured its incentive programs under Pillar 3 of the policy to exclusively target Beyond Bengaluru areas, ensuring balanced development across the state.

These incentives are designed to support infrastructure upgrades and provide operational benefits tailored to these emerging clusters.

To boost economic activity and attract investments, the Government is committing to develop state of the art infrastructure in key Beyond Bengaluru clusters, including:

• Hubballi-Dharwad-Belagavi
• Mysuru
• Mangaluru
• Tumkur
• Shivamogga
• Kalaburgi (Gulbarga)

Infrastructure enhancements in these areas will include modernized airports, improved road networks, and advanced telecom facilities, making them attractive locations for businesses to thrive.

The "Beyond Bengaluru" initiative is a key focus of the Karnataka government, designed to replicate the success of Bengaluru as a technology and innovation hub across other parts of the state.

The initiative is intended to promote equitable regional development, enabling cities like Mysuru, Mangaluru, Hubballi-Dharwad-Belagavi, Tumakuru, Kalaburagi, and Shivamogga to become thriving tech hubs.

The government aims to leverage the unique strengths of these cities, such as their mix of startups, academic institutions, and multinational corporations, to create a balanced and prosperous statewide tech ecosystem.

Several targeted incentives support the establishment of GCCs in these emerging clusters.

This includes rental reimbursement for companies setting up in the Beyond Bengaluru areas, reimbursement for internet expenses for the first three years, and EPF contribution reimbursement for new employees for the first two years.

The state is also offering grants for strengthening R&D infrastructure, particularly in fields like Artificial Intelligence (AI).

Additionally, support is being extended to smaller "Nano GCCs" (those with between 5 and 50 employees) in Beyond Bengaluru areas, aiming to ensure their growth and long-term sustainability.

Nano GCC Initiative

A key innovation in the policy is the establishment of Nano GCCs in Beyond Bengaluru areas. These smaller-scale centers, employing between 5 and 50 personnel, are designed to offer flexible and agile operations. Nano GCCs are exempt from minimum employment or investment thresholds, enabling companies especially emerging and niche players to scale their operations with minimal risk. These centers will benefit from tailored incentives, fostering regional growth and offering a business-friendly environment.

It is also noteworthy that The Karnataka Digital Economy Mission (KDEM) will play a pivotal role in aiding GCCs with both expansion and new establishments in Beyond Bengaluru areas. This dedicated support framework underscores the state's commitment to creating a robust and diversified economic landscape beyond its traditional hubs.

By focusing on strategic infrastructure and flexible incentives, Karnataka aims to unlock the economic potential of its regions beyond Bengaluru, paving the way for inclusive growth and innovation.

Artificial Intelligence Innovation

Artificial Intelligence (AI) needs no introduction. It is both the present and the future. From revolutionizing industries to driving innovations in healthcare, finance, and technology, AI has already begun reshaping the global landscape.

In line with this, The policy recognizes the central role AI plays in driving innovation. The state aims to position itself at the forefront of AI research and application, creating a comprehensive ecosystem that supports both the development and ethical use of AI technologies. The initiatives being,

• Establishing a Centre of Excellence (CoE) for AI in Bengaluru, based on the triple helix model, with a hub-and-spoke structure involving academic institutions statewide. This CoE will focus on compute capacity, curated datasets, ethical AI principles, startup support, and ecosystem development.
• Formation of an AI Skilling Council with industry participation to develop and deliver AI-focused curriculum. The Government will fund curriculum creation, ensuring widespread dissemination through higher education institutions across Karnataka.
• Expansion of the Nipuna Karnataka Initiative, the scheme that was initiated with the objective of enhancing skill development in the state, particularly in emerging technologies like AI, ML, and Blockchain. The present policy aims t integrates AI recommendations from the Karnataka Skill Advisory Council’s working group on AI.

This initiative aims to bridge the skill gap and provide a steady supply of skilled professionals to meet the growing demands of Global Capability Centers (GCCs) and other key industries.

The state government has allocated INR 100 crore initially, with plans for increased annual contributions in the future.

Dedicated GCC unit

The policy sets out that the Government of Karnataka aims to create a conducive environment for Global Capability Centers (GCCs) by establishing a dedicated unit within the Department of Electronics, IT, BT, and S&T.

Further, the policy clearly illustrates the functions of the GCC unit. Them Being;

• Provide Dedicated Support: Assign a Single Point of Contact (SPOC) to each GCC to ensure efficient communication and resolution of issues.
• Streamline Operations: Serve as a central coordination hub between GCCs and various state government departments.
• Facilitate Real Estate Search: Develop a digital portal to provide a one-stop platform for exploring commercial spaces in Karnataka.
• Offer Regulatory Guidance: Provide comprehensive guidance on policies, regulations, and compliance requirements, and facilitate policy discussions with industry leaders.
• Foster Industry-Academia Collaboration: Connect GCCs with local educational institutions, startups, and incubators to promote talent recruitment, skill development, and collaborative research.
• Accelerate Setup Process: Process all necessary operational approvals for GCCs within 45 days, ensuring a streamlined setup process.
• Enhance Employee Experience: Assist GCC employees by providing information on local social infrastructure.

Engineering R&D (ER&D)

Recognizing the significant contribution of Engineering R&D (ER&D) to the growth of Global Capability Centers (GCCs) in India, the Government of Karnataka aims to further strengthen its leadership in this sector. The policy will focus on the following key areas:

• Promoting Best Practices: Facilitate ER&D entities to adopt leading industry practices and gain access to new market opportunities.
• Fostering Innovation: Encourage the creation of new innovative ER&D ecosystems and facilitate capital infusion through collaborative efforts between industry and government.
• Enhancing Intellectual Property: Promote the creation, registration, and retention of intellectual property (IP) within Karnataka.
• Strengthening Industry-Academia Links: Foster strong collaborations between industry and academia to accelerate the development of innovative ER&D products, solutions, and services.

Talent and Workforce

The policy aims to foster a skilled workforce and promote innovation by incentivizing GCCs to invest in talent development and industry-academia collaborations.

The key initiatives of the policy with this regard are as follows,

• Skill Enhancement: Incentivizing GCCs to enhance the technical and soft skills of graduates and diploma holders.
• Curriculum Development: Supporting the development of future-oriented curricula and funding training programs for students and faculty.
• Internship Opportunities: Reimbursing GCCs for internship stipends to provide internship opportunities to 1 lakh students during the policy period.
• Research Collaboration: Supporting joint research projects between academic institutions and GCCs to encourage the industrial application of academic research.
• Leadership Development: Fostering partnerships between GCCs and prestigious educational institutions to develop leadership skills and providing financial incentives for creating global leadership development programs.
• Industry-Academia Matchmaking: Establishing a matchmaking platform to facilitate ongoing interaction between academia and GCCs, fostering collaboration and addressing challenges.
• Recruitment Assistance: Providing recruitment assistance to GCCs setting up or expanding operations beyond Bengaluru.

Global Outreach Initiative

To elevate Karnataka's position as a premier global business hub, the government will launch a Global Outreach Initiative. This initiative will involve:

• Strategic Global Presence: Participating in high-profile international roadshows, trade delegations, and leading technology and trade conferences.
• Showcasing Karnataka's Strengths: Highlighting the state's competitive advantages, such as a skilled talent pool, cutting-edge infrastructure, and a supportive regulatory environment.
• Attracting Global Businesses: Fostering international collaborations and attracting top-tier global businesses to Karnataka.
• Effective Implementation: Developing a comprehensive strategy to ensure targeted engagement with key global markets and industries.
• Robust Marketing and Distribution: Leveraging digital media, social media platforms, and podcasts to effectively communicate Karnataka's strengths and opportunities to a global audience.

The GCC Acceleration and Investment Council

The policy mentions that the state will establish a GCC Acceleration and Investment Council. This Council will be comprised of influential leaders from various GCCs, providing strategic guidance and insights to align the state's GCC initiatives with global business trends and regional growth objectives.

• Diverse Leadership: The Council will include global leaders, CXOs from top-performing GCCs, international trade experts, and thought leaders in business strategy and innovation.
• International Expertise: Members with a strong background in global markets and international business relations will be included to provide insights on global trade dynamics and investment trends.
• Cross-Industry Representation: The Council will have representatives from diverse industries to ensure comprehensive and industry-specific policies and strategies.

Energy, Property, and Regulatory Incentives

To further ease the burden on businesses, the government is introducing several additional incentives.

GCCs operating in Beyond Bengaluru areas will benefit from an exemption from electricity duties for five years, along with the opportunity to switch to industrial power tariffs.

Property tax reimbursements are also available for these centres.

The government is also working to simplify the regulatory environment, with initiatives like a dedicated helpdesk for GCCs, designed to provide expert guidance and expedite approval processes.

Applications for "Right of Way" permissions for infrastructure such as cable laying and tower erection will be processed within 30 working days.

Moreover, the policy supports intellectual property creation by reimbursing statutory fees for domestic patent filings, and it offers reimbursement for quality certification fees for GCCs setting up operations in Karnataka.

These measures are intended to foster a supportive and efficient ecosystem for businesses operating in the state.

Deeper Dive towards the Incentives and Initiatives

In this section, I shall offer a more nuanced and deeper illustration of the incentives offered by the policy.

Skilling of Local Talent

The Government of Karnataka (GoK) is focused on enhancing the skills of local talent by supporting various skilling initiatives for new recruits within a year of their hiring.

The government will reimburse 20% of the total expense spent on skilling initiatives, up to INR 36,000 per graduate and INR 18,000 per diploma holder, for up to 100 employees or 15% of the total workforce, whichever is less.

A Global Capability Centre (GCC) can avail this incentive annually, and it can be used once during the policy period.

The skilling initiatives can cover:

• Technical Skilling: Focused on employees in non-technical roles.
• Soft Skill Enhancement: For both tech and non-tech employees.

This initiative is available to any new or existing GCC in the state with a minimum of 100 employees.

Conclusion

The Government of Karnataka (GoK) has laid out a comprehensive and strategic framework to boost the establishment and expansion of Global Capability Centres (GCCs) across the state and has invested heavily on the same.

By combining targeted incentives with institutional support and forward-looking initiatives, it creates a conducive environment for GCCs to scale, innovate, and integrate more deeply into global value chains.

There seems to be a positive shift since the inception of this policy as GCCs have begun to shift / open operations in targeted districts such as Hubli, Managalore and Mysore.

Note - All statistical data and incentives are taken from the Karnataka Governments GCC Policy.