Why India's Tier-II cities are becoming the new frontiers for GCCs

India is experiencing growth in global capability centres (GCCs), particularly in tier-2 and tier-3 cities, which have increased from 5% in FY2019 to 7% in FY2024. According to a Zinnov-Nasscom India GCC Landscape report published last week, these centres are projected to expand by 15-20% by 2025 and 25-30% in the subsequent years.

The Union Budget 2025-26, presented on February 1 further supports this trend by proposing a national framework to enhance GCC growth, especially in Tier-II cities.

According to the Economic Survey 2024-25, the number of GCCs in India has increased from 1,430 in FY19 to over 1,700 in FY24, employing nearly 1.9 million professionals. India has emerged as a key destination for multinational corporations centralising their technology, analytics, finance, and R&D operations.

As of 2024, more than 450 Forbes Global 2,000 companies have set up GCCs in India, with projections suggesting that the number could reach around 620 by 2030. While Bengaluru remains the leading GCC hub, hosting over 285 Forbes Global 2,000 companies and employing more than 560,000 professionals, followed by Hyderabad, which has over 110 companies employing more than 190,000, Arindam Sen, Partner and GCC sector leader at EY India, noted that cities like Jaipur, Vadodara, Coimbatore, and Kochi are emerging as attractive alternatives to metros, with GCC leaders increasingly eyeing these locations for expansion.

These cities currently account for about 8% of all GCC units in FY2024, up from 5% in FY2019. More than 140 GCCs have established hubs in tier-2 cities, indicating a strong interest in leveraging local talent.

Lalit Ahuja, CEO of ANSR, emphasised that with 80% of global firms yet to establish GCCs in India, the proposed framework represents a strategic shift in the tech landscape, recognising GCCs' potential to drive economic growth. He believes the abundance of engineering, IT, and business institutions in tier-2 cities will help GCCs find the right talent while broadening economic benefits.

Tier-2 cities typically offer a 10-35% lower cost of living than nearby tier-1 locations. Currently, 11-15% of India's tech talent resides in tier-2 and tier-3 cities, where talent costs are 25-30% lower and real estate rentals are 50% cheaper, according to a recently published report by ANSR.

Piyush Jha, MD of GlobalLogic India and APAC noted in a TechCircle interview that talent availability, lower costs, and government incentives are fueling GCC growth in smaller towns. He added that these incentives encourage companies to set up operations in tier-2 cities.

GlobalLogic has recently launched operations in Mahabubnagar, near Hyderabad, and is expanding in Ahmedabad and Nagpur to cultivate local talent without requiring migration to larger urban centres. With nearly 16,000 employees in India, the company is focused on investing in tier-2 and tier-3 cities.

Both central and state governments recognise the potential of tier-2 cities as growth engines. For example, Karnataka's GCC policy aims to maintain Bengaluru's status as a hub while promoting equitable growth through its 'Beyond Bengaluru' initiative, which seeks to replicate Bengaluru's success in other regions and encourage GCCs to establish operations in cities like Mangaluru, Mysuru, and Kalaburagi.

Sumeet Salwan, partner at Deloitte India, noted that while large cities were previously the focus, the post-pandemic era has led to significant decentralisation, with over 60% of graduates coming from smaller towns and 30% relocating to tier-1 cities for jobs. These locations, which currently account for 11-15% of tech talent, have promising growth potential if supported by government investment in infrastructure. 

Salwan said, that hiring talent in these areas also presents economic advantages, with businesses enjoying 25-30% cost savings in talent pool expenses and 50% in real estate costs, attracting interest from global enterprises.

Monika Potharkar, Director-FSS and Site Lead at General Mills India Center, a GCC, said that strengthening talent pipelines, upgrading infrastructure, and enabling industry collaboration will further position India as the preferred global hub for enterprise innovation and operational excellence.