Revenue of ER&D GCCs grows over 30% to $25 billion in India, shows Economic Survey

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The economic survey shows that engineering, research, and development (ER&D) Global Capability Centres (GCC) have grown by over 30 percent to about $25 billion in financial year 2022-23.

In comparison, the information technology (IT) and business process management (BPM) sectors grew faster in percentage terms but on a smaller base. GCCs within the IT segment grew by 30 percent to $9.7 billion, while the BPM segment grew about 27 percent to $10.7 billion in FY23.

The data points towards the larger debate around the IT services industry in India, which has been struggling in the last couple of quarters.

By FY23, GCCs in India have grown significantly to over 1,580 centres with over 2,740 units from over 1,000 centres in FY15. These centres contribute to economic growth by providing high-quality employment, the economic survey said.

GCCs have caught the attention of several lawmakers and policymakers across different states in India, resulting in various states undertaking a multi-pronged approach to boost the GCC ecosystem.

For example, Karnataka, Telangana, and Tamil Nadu have launched R&D policies to expand the GCC landscape in sectors such as auto and electric vehicles, electronics, pharma, and life sciences in the states.

As more global players eye India to set up their GCC operations, the government has a crucial role in facilitating their entry, the document read. "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."

In FY23, the total talent employed in Indian GCCs exceeded 16.6 lakh. Revenue from India's GCCs has increased from $19.4 billion in FY15 to $46 billion in FY23, growing at a compound annual growth rate (CAGR) of 11.4 percent.

As per National Association of Software and Service Companies (Nasscom), the key drivers for the growth of ER&D in India include strategic long-term partnerships, extensive digitalisation, and the adoption of cloud technologies.

“The IT services segment has expanded due to increased demand for application modernisation, cloud migration, platform development, and enhanced cybersecurity measures,” the economic survey read.

Also read: Hiring in IT sector unlikely to pick up significantly, says Economic Survey

The BPM sector in Indian GCCs has grown by transitioning from traditional services to more intelligent operations and data-driven solutions.