Small cities, big future: Tier-II & III towns emerge as hotspots for GCC growth in India

Time of India

28-07-2025

India
's tier-II and III cities can emerge as hubs of global capability centres (GCC), supported by the government's proposed dedicated framework, incentives from competing states, and a growing ecosystem of enablers that are assisting the
GCC
setup.
Experts say the shift can foster inclusive development, generate jobs beyond traditional hubs, and address the challenges of over-saturation and infrastructure pressures in metro cities.
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As per industry estimates, India has more than 1,700 GCCs as of FY24, with roughly two new centres being established every week. The sector generates $64.6 billion in revenue and employs about 1.9 million people, with more than 82,000 of these jobs being in tier-II and III cities.
Tier-1 cities like Bengaluru, Hyderabad, and Chennai continue to be the primary bases. Emerging cities have around 7% of India's GCCs in 2024, up from 5% in 2019.
The government in the February budget announced a framework "as guidance to states for promoting Global Capability Centres in emerging tier 2 cities", focused on enhancing availability of talent and infrastructure, building bylaw reforms, and mechanisms for collaboration with industry.
There is also a rise in mid-market firms looking to India to set up GCCs, with over 120 such firms expected over the next year, as per ANSR. Research firm Everest Group expects 75% of the 1,200-1,250 new GCCs in India in the next five years to be small and mid-sized firms.
"We are likely to see a convergence between the two trends-tier-2 and tier-3 cities attracting GCCs, and mid-market companies choosing India as a strategic delivery location," said Rohan Lobo, partner, Deloitte.
Currently, many mid-market firms are initially gravitating toward established tier-1 hubs due to the comfort of ecosystem maturity, Lobo said. However, there is a growing case for a more distributed approach.
Talent and costs
Digitally skilled talent in tier-2 cities grew over 25% over the past two years, according to a Nasscom-Zinnov report. These locations also see 20-30% lower attrition compared to the 15.2% attrition in tier-1 hubs.
From an operational lens, companies can save around 25% on employment costs by setting up in emerging cities due to lower real estate prices, reduced overheads, and sustainable compensation expectations, the report said.
Take silicon to systems design solutions firm Synopsys, for example, which has a GCC in Bhubaneswar.
"Establishing hubs in tier 2 and 3 locations like Bhubaneswar has created new opportunities for talented engineers to make a real difference at Synopsys, which then has a ripple effect that reaches virtually every industry," Rituparna Mandal, vice president, customer success group, Synopsys, told ET. "We're seeing more graduates in electronics, VLSI (Very Large Scale Integration), and related fields every year, and many of them are eager to work on global projects."
The Bhubaneswar centre works closely with the company's R&D groups worldwide and has tied up with local universities like IIT Bhubaneswar.
"The cost of living and operations can be more manageable, which helps us invest more in our people and long-term growth," said Mandal.
Decentralising innovation
Firms like Mastercard, which has a GCC in Vadodara employing nearly 400 people across various businesses and technology programmes, also see this as an opportunity to decentralise innovation.
"Operating in emerging hubs is not just a cost decision-it's a future-facing growth strategy aligned with our purpose to power economies and empower people," said Rajesh Mani, SVP & head-Asia Pacific technology hubs, Mastercard. "We see these locations as more than satellite offices-they are platforms to embed leadership, shape culture, and decentralise innovation."
The Vadodara GCC contributes to several key global solutions that make payments safer, smarter, and more accessible, he said. This includes the Mastercard Digital Enablement Services (MDES) platform, which tokenises card and account numbers to enable secure digital transactions, and the firm's Carbon Calculator.
Global engineering and manufacturing companies have established R&D and automation hubs in cities such as Vadodara and Nashik, capitalising on established technical institutes and industry clusters to drive innovation in areas like IoT, process automation, and advanced analytics, said Lobo.
Similarly, a US-based SaaS provider set up its first offshore centre in Mysuru, attracted by the city's strong IT education ecosystem and government incentives, and the company reported faster ramp-up times and greater team stability compared to metro peers.
In Coimbatore, a global electronics manufacturer is pioneering IoT-enabled, advanced manufacturing and automation practices, while in Salem, a prominent financial services organisation is streamlining operations through intelligent process automation and digital workflows.
Policy push
Minister for electronics and IT Ashwini Vaishnaw said earlier this month that the government is working on a roadmap to expand GCC presence in tier-2 and 3 cities, with a focus on strengthening industry-academia collaboration to build a talent pipeline.
The government is doing a "mapping" exercise to identify the right tie-ups, said a person aware of the developments. The centre is also mulling a model where states can be brought onto a common portal so that GCCs can get the permissions they need quickly.
State governments, on their part, have been trying to attract GCCs as well. Last year, Tamil Nadu announced it will incentivise the creation of high paying jobs in new GCCs by providing a payroll subsidy. Karnataka incentivises GCCs to expand beyond metros to cities like Mysuru, Mangaluru,
Shivamogga
and Hubballi-Dharwad.
Uttar Pradesh
is the latest to release a GCC policy with sops such as freshers recruitment subsidy and R&D and innovation incentives.
"This coordinated approach by various states creates a competitive yet collaborative environment that benefits the entire ecosystem," said
Mrinal Duggal
, Head of Sanofi GCC (Hyderabad).
Establishing GCCs in tier-2 and tier-3 cities would address the infrastructure pressure on metros while creating innovation clusters that can rival traditional tech hubs, Duggal said. Tier-1 cities could pivot toward more specialised, high-value innovation and R&D, further elevating India's global value proposition.
Challenges
However, unlocking the full potential of tier-2 and 3 locations requires navigating a unique set of structural and ecosystem challenges, said Mani.
"While these cities are gaining operational maturity, many continue to face gaps in cloud infrastructure, startup depth, and local R&D capabilities," he said, citing a recent PwC India report. "Inconsistent high-speed connectivity, limited availability of cloud-ready data centres, and uneven regulatory clarity can further impact scalability."
The industry meanwhile is calling for rationalisation of safe harbour margins in the transfer pricing regime and plug-and-play infrastructure in tier-2 and 3 locations to help GCCs set up quickly and smoothly.
(This article is published in partnership with Deloitte)