Tier II-III Cities in India Become Pivotal in Scaling Up GCCs GCCs are increasingly moving to tier-II cities due to factors like labour arbitrage, availability of human resources specially engineering talent, and cost factor
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India's tier-II and tier-III cities are becoming pivotal in scaling up global capability centers (GCCs) due to significant cost advantages and access to a growing talent pool. Tier II-III cities accounted for 7 per cent of the total GCCs in FY24, up from 5 per cent in FY19, according to the latest 'India GCC Landscape' report by Nasscom-Zinnov.
While new GCCs prefer tier-I cities, established GCCs expand to tier-II cities. Ahmedabad, Mysuru, Vadodara, Nashik, Tirunelveli, Bhubaneswar, and Coimbatore have emerged as key hubs for expansion of the established GCCs. More than 140 GCCs are estimated to be established in these locations.
There has been a 30-40 per cent increase in demand for the workforce across sectors in tier-II cities, according to GCC consulting firm ANSR. Currently, 11-15 per cent of India's tech talent resides in tier-II and tier-III cities. Tier-II cities typically have 10-35 per cent lower cost of living as compared to the nearest tier-I location. Talent pool costs are 25-30 per cent lower than those in mature hubs, with 50 per cent cost savings in real estate rentals compared with mature hubs.
"Post-Covid, talent has become more distributed, and we are seeing a growing opportunity in tier-II cities as emerging GCC destinations. These locations offer a compelling value proposition—enhanced quality of life, lower cost of living, and less competition for talent. However, there are still challenges to address, particularly around infrastructure and connectivity, with limited access to international airports being a key hurdle. While tier-II cities are evolving, we need to continue improving these aspects to fully unlock their potential as strategic GCC hubs," said Vikram Ahuja, Co-founder ANSR and CEO Talent500.
Some of the GCCs set up in tier–II and tier–III cities in the last five years include Pernod Ricard, ThoughtSpot, o9, Mahale, Flex, First American, and Metso. Among them, Metso, a sustainable energy company that expanded into Vadodara; spirits maker Pernod Ricard has set up presence in Nashik; and First American has set up a centre in Salem in Tamil Nadu.
"GCCs are increasingly moving to tier-II cities due to factors like labour arbitrage, availability of human resources specially engineering talent, cost factor as compared to tier-I cities, recent infrastructure development in tier-II cities by the government, and social and cultural factors as tier-II cities becoming more cosmopolitan," said Vivek Rath, National Director- Research, Knight Frank India.
To be sure, metro cities still dominate the share of GCCs in India. According to TeamLease Digital, a leading tech staffing and learning solutions provider, Bengaluru stands out as a prominent hub for GCCs, hosting 36 per cent of TeamLease Digital's total client base for the first two quarters of FY25. This city is notably characterized by its dominance in the High-Tech industry, which comprises 37 per cent of the talent concentration.
The findings also showed Hyderabad accounted for 14 per cent of TeamLease Digital's client base. The city excels in the High-Tech industry, which contributes 45 per cent to the GCC headcount. Hyderabad's GCCs are at the cutting edge of digital transformation, leveraging advancements in cloud computing, AI, cybersecurity, blockchain, and data analytics to enhance global operations.
"Over the past few years, GCCs have emerged as powerhouses of innovation and job creation across industries. As GCCs continue to evolve, we are increasingly partnering with them across locations to address their demand for niche skills, while also co-creating new job functions," said Neeti Sharma, CEO, TeamLease Digital.
