Global capability centres (GCCs) have boosted India’s services exports in a year when merchandise trade remained flat.
Within services sector, while IT services/software holds a larger share in exports and is rising, business services exports have seen a sharp rise supported by India emerging as a hub for GCCs, the Economic Survey notes.
Growth in GCCs is reflected in the services Balance of Payments with ‘Other Business Services’ being the second-largest contributor in services exports in FY24 at 26 per cent after IT services at 48 per cent, data from Economic Survey show. In fact, the share of software exports in overall services exports has declined from 50 per cent in FY21 to 48 per cent in FY24.
Exports from ‘Other Business Services’ stood at $88.6 billion in FY24 compared to $80 billion in FY23, and this segment has achieved a CAGR of 18 per cent in exports between FY20 and FY24.
As per the Economic Survey, GCCs account for more than 1 per cent of the country’s GDP and the share is expected to grow further. Initiatives like streamlined regulations and compliance procedures for foreign companies for setting up GCCs, flexible labour laws, and single-window clearance systems for faster approvals have eased the business process, it said.
“India’s deep integration into the value chains of the global software industry has led to a change in the composition of its services exports basket. While the early 2000s was a period of business process outsourcing (BPOs) that provided cost-cutting back-end IT services, India now looks beyond such services,” it said. “The Russia-Ukraine conflict and global inflation pressured wages encouraged global players to look towards India to set up their back-office operations to balance their cost model. This gave rise to a sudden proliferation of the GCCs,” it added.
Govt support
The government also acknowledged its role in facilitating GCC growth. “Government support for identifying new business models for partnerships, simplifying the entry process, and emphasising trust and data security, among others, will further encourage the location of GCCs in India,” the Survey said.
Vikram Ahuja, Co-founder of consulting firm ANSR, said that they have witnessed firsthand the GCC boom. This environment allows us to set up and scale GCCs effectively, delivering significant value to our clients. Currently, GCCs are witnessing accelerated and unprecedented growth, where ANSR will be setting up five new GCCs in August.