Suggestion for National Framework for Global Capability Centres

Context

The Confederation of Indian Industry (CII) has released a suggested National Framework for Global Capability Centers (GCCs).

Key Highlights

• Investment facilitation: The policy calls for legally supported Digital Economic Zones that have “plug-and-play physical and digital infrastructure, harmonised regulations and competitive incentives.”
• National Portal: It proposes a National Single Window Portal to offer smooth approvals, backed by a three-tier governance framework centered around a National GCC Council.
• Extension: It advocates extending GCCs beyond India’s six metropolitan centers.
  • Coimbatore, Kochi, Indore, Jaipur, Bhubaneswar, and other Tier-2 and Tier-3 cities are identified as potential future growth hubs, growing digital workforce, and higher retention rates.
• Concessional Business Tax: The government should think about granting concessional business tax rates or tax holidays to GCCs established inside the designated special economic zones.
• Services Clarification: The government should also clarify the kind of services that GCCs are providing in order to get rid of the label of “intermediary.”
  • This will facilitate thorough examination by authorities on tax refund requests and speed up the process of getting refunds for the goods and services tax (GST).

Global Capability Centers

• Global In-house Centers (GICs) or Captives, sometimes referred to as Global Capability Centers (GCCs), are primarily offshore centers created by multinational corporations at the global level to offer a range of services to their parent companies.
• These hubs function as internal entities inside the worldwide corporate framework, offering specialized services like IT, research and development (R&D), customer support, and other business functions.
• The GCCs have transformed from cost-cutting centers, mostly created to benefit from cheaper labor, to strategic hubs that foster creativity. and result in value creation over the last few decades.

GCC Landscape of India

• India already has over 1,800 GCCs that employ 2.16 million experts and generate about $68 billion in direct gross value addition (GVA), which is equivalent to around 1.8% of the country’s GDP.
• The CII framework predicts that by 2030, the number of centers might increase to 5,000, producing between $154 and $199 billion in direct GVA.
• The total effect, which includes indirect and induced effects, may reach $470–600 billion.
• Potential employment: It might result in 20–25 million jobs by 2030, with 4–5 million of those being high-quality direct jobs in industries like cybersecurity, digital platforms, artificial intelligence, and engineering R&D.

India’s GCC Growth Drivers

• India is well-known throughout the world for its varied talent base, which includes professionals in finance, IT, engineering, analytics, and other fields.
  • GCCs have been able to carry out complicated, high-value projects in India because of the availability of a qualified labor force.
• Advances in technology: Some of the cutting-edge technologies that have been adopted quickly include blockchain, the Internet of Things (IoT), AI, and ML.
  • This has, in turn, allowed Indian GCCs to digitally revolutionize their parent firms and provide novel solutions.
• Strategically focused: Over the years, multinational corporations (MNCs) have realized the value of establishing GCCs in India, moving from being known as a cost-saving hub to a strategic one.
  • Businesses now regard these centers as a strategic resource that allows them to increase their operational effectiveness, promote growth, and gain a competitive edge.
• Government backing: Several Indian government reforms, such as the Digital India Campaign, which aims to facilitate business operations, have helped to make this happen. In India, there are favorable conditions for the development of GCCs.

Way Ahead

• By changing the view of India from a cost-saving medium to a center of innovation and strategic value, global capability hubs have revolutionized the corporate environment in the nation.
• By making use of India’s skilled workforce, technological prowess, and pro-government legislation, GCCs in the nation have fostered economic expansion, job creation, and regional development.
• Through ongoing innovation, partnership, and investment in infrastructure and people, GCCs may advance India’s aim of becoming a US$ 5 trillion economy while also fostering sustainable development.

Source: The ET

Mains PYQ

Q. “The broader aims and objectives of WTO are to manage and promote international trade in the era of globalization. But the Doha round of negotiations seems doomed due to differences between the developed and the developing countries.” Discuss from the Indian perspective. (2016)

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