Infra, talent, tax breaks: What Karnataka, Telangana, Tamil Nadu want from Centre’s Tier-II GCC policy

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As the central government readies a national Global Capability Centre (GCC) framework for Tier-2 and 3 cities, Karnataka, Telangana, and Tamil Nadu, states that together account for over half of India’s GCCs, are pushing for infrastructure investments, talent pipeline development, and tax breaks to push the captive centres's growth beyond metros.

A GCC is a captive unit set up by a company to carry out information technology (IT) and related business functions.

On February 1, Finance Minister Nirmala Sitharaman announced the national framework to decentralise the country’s GCC boom, a sector poised to contribute 3.5 percent to India’s GDP by 2030.

State governments have started submitting suggestions to the Centre to shape the framework that is expected to be rolled out soon.

Each state has its own strengths, and asking for targeted support. While Karnataka wants help in building physical and social infrastructure, Telangana seeks co-creation of curriculum, scaling of skilling models, and support for setting up Centres of Excellence (CoEs). On the other hand, Tamil Nadu is seeking tax breaks to attract companies into its already-prepared Special Economic Zones (SEZs).

This policy intent signals a major shift -- from organic GCC growth to policy-led orchestration, according to Karthik Padmanabhan, Managing Partner, management consulting firm Zinnov.

"India already has over 1,700 GCCs and nearly 1.9 million employees. But the national framework, combined with state-level execution, is widening India’s moat as the world’s GCC capital,” Padmanabhan told Moneycontrol.

Karnataka, Telangana, and Tamil Nadu together host more than 1,500 of India’s over 2,970 GCCs.

Karnataka’s infrastructure, talent push

For Karnataka, one of the most mature GCC markets in the country, the central government’s policy push must go beyond high-level intent and focus on creating foundational support in smaller cities.

“In terms of physical infrastructure, connectivity plays a very, very important role, not just to Bengaluru, but to other cities across the country as well,” Ekroop Caur, Principal Secretary, IT-BT, Government of Karnataka, told Moneycontrol.

She added that apart from road and space availability, the government must prioritise social infrastructure like quality healthcare, education, and living standards, which are key considerations for companies looking to set up offices in new locations.

Karnataka has been working on talent readiness, especially in emerging technologies. Caur highlighted that the state is investing in industry-focused skill development to build a sustainable workforce pipeline outside Bengaluru.

She also pointed to a network effect in cluster development: “Once one or two companies enter a region, the ecosystem starts to build. Startups also feed into this momentum,” Caur said.

Her remarks highlight the importance of early-mover support and infrastructure-led enablement from the Centre.

Karnataka has already unveiled India's first dedicated GCC policy, on November 19, 2024, with an aim to create 3.5 lakh new jobs and generate $50 billion in economic output.

Aiming to position Karnataka as a global hub for cutting-edge innovation by 2030, the policy seeks to nurture a diverse, future-ready workforce.

Tamil Nadu calls for tax breaks

Tamil Nadu, which claims its Tier-II cities already meet most infrastructure benchmarks required by GCCs, is looking to the Centre for one specific intervention: tax breaks.

“If there are specific tax breaks or income-tax holidays for GCCs set up within SEZs in Tier-II and III cities, that would be useful,” Darez Ahamed, MD & CEO, Guidance Tamil Nadu, told Moneycontrol.

Guidance Tamil Nadu is the nodal agency for investment promotion and single-window facilitation, established in 1992 by the state.

“We already have connectivity and infrastructure. Central incentives can add to our measures and make India more attractive overall to global enterprises,” Ahamed added.

The state has been offering its own incentives, such as a salary-linked subsidy, to encourage quality job creation.

It has also implemented women-friendly workplace transport and other inclusion-focused policies. But to deepen decentralisation, it believes fiscal support from the Centre will play a catalytic role.

“States are offering ready office spaces, skilling programmes, and inclusion policies. The Centre’s role now is to amplify these efforts with coordinated vision and regulatory clarity,” Padmanabhan said while summing up the requests by various states.

He believes the impact will be far-reaching, extending beyond metros to emerging clusters in Bhubaneswar, Nagpur, Vadodara, and Coimbatore, each offering sector-specific potential. "We're not just creating more jobs," he said. "We're building resilient, future-ready micro-markets," he said.

Also, read: Karnataka, Tamil Nadu woo GCCs with incentives in state budgets

Telangana’s co-creation push

With Hyderabad already home to nearly 20 percent of India’s GCCs, Telangana is now doubling down on its Tier-II strategy.

The state has developed IT hubs in cities like Warangal, Nizamabad, Karimnagar, and Khammam, and is investing in talent and broadband infrastructure through initiatives such as the Young India Skills University (YISU) skilling programme.

For the next phase, it wants the Centre to join hands.

“We plan to collaborate with the central government and top institutes to co-create curriculum in strategic areas,” Jayesh Ranjan, Special Chief Secretary, IT, Government of Telangana, told Moneycontrol. “We also want to scale up successful models like YISU and the AI University across the country with the Centre’s support.”

Telangana also wants Union support to establish CoEs in emerging technologies across Tier-II and III cities. These CoEs, Ranjan said, could serve as anchor institutions to drive both academic-industry collaboration and attract global enterprises.