Over the past year, there has been a major shift happening, with a large number of multinational corporations expanding their operations in India. There is a shift of jobs from the United States to India. Cities like Bengaluru, Hyderabad and Noida are emerging as a global hub and thriving ecosystem for these companies. There is an increase in the number of Global Capability Centres in India. Global Capability Centres (GCCs) are essentially internal centres of multinational corporations, situated in another country, intended to capitalise on local talent and expertise to carry out essential business operations. According to Everest Group estimates from last year, India hosted over 1,800 Global Capability Centres, serving more than 1,200 global enterprises and employing 2.1 million professionals. Major US companies like Microsoft, Amazon, Google, Walmart, Costco, etc. have established their GCCs in India. Several structural, economic, and cultural factors are driving this relocation trend.
1. Availability of skilled workers
India offers a large talent pool to these companies. Every year, over 1.5 million engineering graduates join the workforce, along with a growing number of MBAs and data science professionals. As the United States faces a dire need for skilled workers, particularly following former President Trump’s policies on the H-1B visa, the cost and difficulty of hiring Indian talent in the US have increased. As a result, many companies are now shifting jobs to India. Furthermore, India’s position as the second-largest English-speaking population globally serves as a significant asset.
2. Cost efficiency
Cost considerations also play a crucial role in this relocation process. Wage levels in India are significantly lower compared to those in other countries. An experienced engineer earns 50%–70% less than their US counterparts. The costs involved in managing a business, such as rent, electricity, and employee benefits, are also much lower in India. Business-friendly government policies are also an attractive factor.
3. Round the clock
A major reason is the time zone advantage. After the US shift ends, the Indian team begins its work. This enables round-the-clock productivity. This creates a second team at work, equally skilled but with less pay. This is especially beneficial for sectors such as security and customer care.
4. Strategic Location
In addition to the service sector, the shift is also visible in manufacturing. India is situated in a strategic location between the Middle East and Southeast Asia, making it cost-effective for companies to ship goods to multiple markets. After the pandemic, many companies are seeking new manufacturing locations, increasingly viewing India as a popular alternative to China.
5. Huge Consumer Market
India has a population of over 1.4 billion people, representing a diverse range of cultures, languages, and consumption habits. This population forms a huge consumer market, creating significant opportunities for companies, including global firms, to reach a vast customer base. A rising middle class with increasing disposable income further adds to this advantage.
This shift is significant to India, as it positions the country as a key global player. It is a smart move by companies to ensure long-term success. But it’s also important to acknowledge the challenges this brings. For instance, the increasing number of global companies can displace small and medium-sized local companies. Additionally, the work culture in these MNC’s is another aspect, with a report by MediBuddy and CII revealing that 62% of Indian employees experience burnout. Pay disparities also exist, with Indian counterparts often receiving less for the same amount of work. Furthermore, there is a growing environmental concern due to the increased manufacturing activities of global companies. While the advantages are vast, these often benefit a select few, especially those in the middle class and above. It can increase inequality for already disadvantaged groups. Ultimately, the full impact of these shifts on the economy, workforce, and society remains to be seen.
