States, Not Only Cities: Why CII’s GCC Model Policy Matters — And Why I Feel Vindicated

I read the Confederation of Indian Industry’s model policy for Global Capability Centres with a familiar mixture of hope and déjà vu. The policy — which urges states to create dedicated facilitation cells, design sharper fiscal incentives and invest in digital infrastructure like high‑performance computing and data centres — is precisely the kind of pragmatic nudge India needs if GCCs are to spread beyond our traditional metros CII unveils model policy to expand Global Capability Centres beyond metros.

That sentence could have been the opening paragraph of several posts I wrote in the past few years. I have long argued that India’s comparative advantage is not limited to a few cities — it is our deep engineering and digital talent base, spread across states and smaller cities, that can and should power the next wave of global innovation. See, for example, my reflections on Gujarat’s policy to set up 250 GCCs Gujarat Govt unveils policy to set up 250 new Global Capability Centres and my note about GCCs evolving into next‑gen innovation hubs Global capability centers are poised to be next‑gen innovation hubs.

The core idea I want you to notice here — and I say this because it matters to me personally — is that I had flagged these pathways and challenges years ago. I had predicted the shift from purely delivery‑oriented centres to innovation and leadership hubs, and I urged both states and industry to act. Seeing the CII toolkit now feels like validation, but also a reminder of urgency.

Why the CII asks make sense

CII’s recommendations are pragmatic because they acknowledge two realities:

• GCCs are moving up the value chain — from transaction processing to AI, digital engineering and IP creation.
• Most existing GCCs are clustered in six tier‑1 cities; if India wants scale and resilience, we need to grow new hubs in tier‑2 and tier‑3 cities.

The model policy’s prescriptions are sensible: state facilitation cells to reduce friction, targeted fiscal incentives (not just blunt tax breaks), viability gap funding for infrastructure, and state‑level R&D tax holidays. It also explicitly calls for investing in digital backbone assets such as HPC clusters and data centres, and for integrating urban planning — housing, transport and civic amenities — into GCC pitches CII unveils model policy to expand Global Capability Centres beyond metros.

That last point is crucial. Talent chooses cities based on work, yes — but increasingly on quality of life. If we want leaders and deep technical talent to relocate to non‑metro hubs, states must offer more than incentives; they must offer a living ecosystem.

Where my earlier writing fits in

I’ve written about many of these threads before. In 2018 I argued that India could be the “Brain Factory of the World” by leveraging our engineering talent and lower relative manpower costs — and that the service sector (including GCCs) could deliver rapid job and export growth with far less capital intensity than manufacturing Leveraging our Engineering Talent. In 2024–25 I revisited the same theme as GCCs began to double down on AI and analytics, noting that headcounts may double by 2030 and that GCCs could add substantial GDP share GCCs estimated to grow at 14% in FY25, touch 4.5% of GDP.

The core idea I want to emphasise is this — I had raised these points years ago. I had predicted the outcome and even suggested pathways: invest in digital infrastructure, democratise talent development beyond metros, and create incentives that reward R&D and IP, not only jobs. Now, with the CII toolkit reflecting those same themes, I feel a quiet vindication — and a renewed urgency to press these ideas further.

A few practical priorities for states and industry

If I were to distill CII’s model into immediate priorities, they would be:

• Build state‑level facilitation cells that own the GCC onboarding process end‑to‑end.
• Invest in shared digital infrastructure (HPC, data centres, secure connectivity) so smaller cities can offer global‑grade platforms.
• Pair fiscal incentives with long‑term commitments to skill pipelines — skilling and reskilling that feed GCC needs (digital, AI, cloud, data engineering).
• Design incentives that reward R&D and IP creation, and encourage GCC–start‑up–university partnerships.
• Market city‑level pitches internationally; states must brand themselves to underpenetrated markets and to global CTOs.

These are not abstract ideas. They are the natural next steps for a sector that is already delivering growth and, increasingly, innovation Global capability centers are poised to be next‑gen innovation hubs.

Final thought — the moment to act is now

Policy toolkits like the CII model give states a ready blueprint. What will differentiate winners is speed of execution and the courage to look beyond short‑term tax incentives to build ecosystems for the long run. I wrote before that this is India’s opportunity to export intellectual property and leadership — not just services. That belief feels more real this year than ever.

When ideas you voiced earlier begin to reappear in mainstream policy recommendations, you experience validation. But validation alone is insufficient. It should sharpen our resolve to push from good ideas to durable institutions.

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Regards,
Hemen Parekh