Why GCCs are vital for GDP growth

How’s the economy doing? Auto sales are a ready reckoner. Data comes in month after month, and over the past three financial years it looked good. The slowdown that had set in pre-Covid deepened in FY20-21, but then sales took off. Around 31L cars sold in FY21-22, 39L in FY22-23 and just over 42L in FY23-24, which was 25% higher than the pre-Covid high of 33.8L cars. This feel-good story hid the fact that smaller, cheaper, so-called bread-and-butter cars weren’t selling but high-priced SUVs were. Also, bike sales – roughly half the market is sub-125cc commuter bikes – in FY23-24 remained 15% behind the FY18-19 mark. It seems disposable incomes rose at the top of the income pyramid, but stagnated or shrank below. So, where did the extra money at the top come from? Foreign work, Indian staff | There’s a view that this boom in not just expensive cars but premium goods overall partly resulted from the growth of MNC global capability centres (GCCs) in India. GCCs have not become a household word like BPOs were in the early 2000s, but they are similar. In both cases companies use cheaper workforce in India and other countries to keep costs down. But where BPOs are all about outsourcing – a company gives its low-value work, like customer calling, to an external contractor – GCCs offshore the work but don’t outsource it. They are foreign offices of the company. Big names like PayPal, Verizon and American Express have GCCs in India.Back to our car sales meter, how did GCCs spur consumption at the premium end? Fact is, GCCs pay a premium to talent. In August, TeamLease analysed 15,000 positions and reported that GCCs paid 12-20% more than traditional IT companies. The jobs spanned an array of functions, from software development to cybersecurity and project management, and the roles were spread across entry, mid and senior levels. Where IT firms pay software engineers an average starting salary of 5.7L per annum, at GCCs the starting pay of software developers is around 10L. At the senior level, the gap grows to about 7L per annum. And as TOI reported earlier, GCC employees have seen robust pay growth in recent years. In 2020, when salaries were cut across industries, their salaries rose by almost 10%, on average, followed by 15.8% in 2021, 16.5% in 2022 and 12.2% in 2023.Lakhs of well-paid workers | Chipmaker Texas Instruments set up the first GCC in India in 1985. There are 1,600 now – half of all GCCs worldwide – and the count could rise to 1,900 this time next year. The total number of jobs in these GCCs is around 16L, of which 6L were created in just five years, from 2018 to 2023. JPMorgan Chase, the largest bank outside China, alone employs 55,000 staff in its India centres. And these numbers will shoot up because the GCC market size in India has grown rapidly, from $19.6bn (1.7L cr) in 2015-16 to $46bn (3.9L cr) in 2022-23. A Deloitte report sees the market growing to $110bn (9.3L cr) by 2030; Govt’s Economic Survey puts it even higher at $121bn (10.2L cr), earning $102bn (8.7L cr) from exports.Industry body Nasscom says if you take their “direct, indirect and induced impact” into account, GCCs contributed $99-103bn in revenue in FY2020, paid $5.4-5.6bn in taxes, and created 5.2-5.5mn jobs directly and indirectly. Today, their contribution to job creation and money flow would be much more. Their share in India’s IT exports has also risen from 18% in 2015 to 23%.Beyond paying their staff well, GCCs spread money around as they hoover up prime real estate. In Oct, they were said to occupy more than 240mn sq ft of office space across seven major cities, and while this is expected to increase by roughly 22mn sq ft this year, the yearly increase in 2027 could be 26mn sq ft. Why future looks bright | Like BPOs, early GCCs in India were meant to reduce costs for companies, but a Nasscom report says the focus shifted to “value creation and innovation” over the past few years. For example, GE Aerospace’s John F Welch Technology Centre in Bengaluru is working on future aviation engines. Other GCCs are focusing on GenAI, machine learning, life sciences and healthcare. And with companies investing heavily in their India offices, building large teams, it’s inevitable that Indian talent will get to play key roles in their overall organisation.So far, Bengaluru and Hyderabad have been India’s GCC hubs, followed by Delhi-NCR, Mumbai, Pune and Chennai, but new centres are now coming up in smaller cities like Chandigarh, Jaipur, Kochi and Mysuru. Will India’s car sales meter keep ticking?