Tami Nadu has become the first State to provide subsidy for global capability centres (GCCs) in India. The State government will incentivise the creation of high paying jobs in new GCCs by providing a payroll subsidy of 30 per cent in the first year; 20 per cent in the second year and 10 per cent in the third year for jobs with pay above ₹1 lakh per month. This is to make the State as the prime destination for GCC in India, says the Tamil Nadu 2024-25 budget.

A GCC is a higher-end back office for global companies, where a range of activities such as R&D, design of products, payroll processing, happen. According to CBRE India, a real estate research and consultancy company, GCCs have been integral to India’s technology success story, serving as captive hubs that manage global functions for companies ranging from analytics and technology support to product development and innovation.

Nasscom, the IT industry association, says GCC in India over the last decade-and-a-half have scripted a story of success–moving from a ‘proof of concept’ to centres of strategic importance. Mirroring the growing maturity of the Indian IT-BPM industry, GCCs today have moved past the “cost centre” stage. They are now increasingly focusing on high value activities such as IP-creation, building competencies around emerging technologies, setting up centres of excellence and taking full ownership of vendor management.

Anshuman Magazine, Chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE India, said, in Jan-June 2023, Chennai has emerged as the second preferred market for GCCs, with 4 million sq ft of space taken-- with 39 per cent share in the overall market. The sector was majorly dominated by E&M (engineering and manufacturing).

“As a testimony to Tamil Nadu’s successful transition to a knowledge-based economy, a large number of prominent multinational companies are now establishing their GCC in the State. State-of-the-art research, design, product prototyping and testing for the global market are now being done in the State,” Tamil Nadu’s Finance Minister Thangam Thenarasu said.

The government will also facilitate setting up of GCCs in Coimbatore and Madurai. In the Budget Estimates, a sum of ₹2,295 crore has been allocated for the Industries, Investment Promotion and Commerce Department, the State Budget for 2024-25 read.

GCC revolution

There are over 1,000 GCCs in India with Chennai, Bengaluru, Hyderabad, and India accounting for over 45 per cent of the GCCs in the world outside of their home country and these centres are in a sense, a microcosm of the global enterprise.

Tamil Nadu has over 150 GCCs across industries like financial services, manufacturing, automotive, telecom, healthcare and pharma, as well as energy and utility companies.

Some of the big names that have set up their GCCs in Tamil Nadu include World Bank, Standard Chartered, Citigroup, Barclays, Amazon, Walmart, Verizon, AstraZeneca, PayPal, Shell, BNP Paribas, Caterpillar, Wells Fargo, Trans Union, ZF, and Ford. While the GCC wave started with companies headquartered in the US, this extended to the UK and Continent, and more recently, Japan and the far east. Last week, Mizuho announced its GCC is a case in point, said a source.

On the government’s announcement on subsidy for GCCs, Ramkumar Ramamoorthy, Partner at Catalincs, a growth advisory firm, said, “30 years back, the GCC revolution in India started with Citibank, Bank of America, Dun & Bradstreet and American Express setting up their in-house centres in Chennai. But, in the intervening years, many other cities did a better job of attracting some of the biggest names across industries. I see this as a very clever move to bring the spotlight back on Tamil Nadu.”

Unlike many other States, Tamil Nadu has the unique distinction of having deep technology and domain talent across industries such as manufacturing, automotive, financial services and healthcare. Every GCC in these industries is keen on this combination of domain and technology talent, and incentives such as these can help rebuild the narrative in favour of Tamil Nadu and attract companies of various sizes, he told businessline.

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