When Deloitte asked Japanese companies why they chose India for their Global Capability Centres, one answer stood out. It wasn’t cost. It was talent.
For decades, that would have been an unexpected response. India’s GCC story was built on efficiency, scale and labour arbitrage. Today, it is increasingly built on engineering capability, digital expertise and innovation. Japan’s growing GCC presence reflects that shift and, perhaps more importantly, offers a glimpse into where the next phase of India’s GCC story is headed.
Five years ago, boardroom conversations around GCCs revolved around headcount, operating costs and delivery efficiency. Increasingly, one of the first questions is no longer how many engineers India can provide, but whether those teams can own product roadmaps, lead AI initiatives and shape core engineering outcomes. That shift reveals far more about India’s changing role than any investment announcement ever could.
We’ve seen this shift reflected in conversations with global enterprises evaluating or expanding their GCC footprint. The question is no longer whether India can execute. It’s whether India can lead. In many ways, the product has not changed as much as the buyer has. Global enterprises are looking for engineering partners capable of building the future, not just delivery centres that execute instructions.
Japan is no longer coming to India for lower operating costs. It is coming because India offers the engineering capacity Japan increasingly struggles to build at home. This shift is reflected in Deloitte’s report, India’s Strategic GCC Play for Japanese Enterprises, which notes that Japan has emerged as the largest contributor to India’s GCC ecosystem within the Asia Pacific region. More than 100 Japanese companies now operate GCCs in India, accounting for roughly 5 to 6 percent of the country’s total GCC base. More significantly, these centres are no longer limited to transactional or back-office functions. They are increasingly driving artificial intelligence, embedded systems, cloud engineering and end-to-end product development. As Japan grapples with an ageing workforce and a widening engineering talent gap, India has become a strategic capability partner rather than simply an offshore destination.
When an economy as measured and process-driven as Japan changes how it evaluates India, others tend to pay attention. Japan is unlikely to remain an exception. Similar demographic and talent pressures are emerging across several advanced economies, from South Korea to Germany, where demand for experienced engineers continues to outpace domestic supply. As more countries confront the same structural challenges, India’s GCC story is set to become increasingly global, driven less by labour arbitrage and more by engineering capability, innovation and AI expertise. The countries that recognise this shift early will not simply expand their GCC footprint in India. They will redefine what a GCC is expected to do. Yet capability alone will not determine where the next wave of GCC investment flows. As engineering becomes table stakes, countries will increasingly compete on something harder to build: institutional trust.
Success in the next phase, however, will depend on more than talent. Once engineering capability becomes the differentiator, institutional trust becomes the deciding factor. As AI systems become central to product development and enterprise decision-making, companies are placing greater weight on where those systems are designed, governed and managed. In that environment, engineering capability opens the door, but institutional trust determines where long-term investment stays. The next phase of GCC growth will depend on India’s ability to position itself as the most trusted location for long-term engineering, product development and innovation. That requires not only exceptional talent but also a business environment that global enterprises can rely on with confidence.
The government’s recent safe harbour reforms reflect this shift in thinking. As global enterprises make decade-long engineering investments rather than short-term outsourcing decisions, policy predictability becomes part of the value proposition India is offering. By expanding eligibility, simplifying margins and automating approvals, the reforms attempt to reduce one of the long-standing uncertainties surrounding transfer pricing for GCCs. For global enterprises making decade-long investment decisions, predictable policy has become as important as engineering capability itself.
Yet policy changes matter only if they change behaviour. Before these reforms, nearly 95 percent of eligible companies chose not to opt for the safe harbour regime, not because the economics were unattractive, but because many feared it would invite greater scrutiny. Trust, unlike legislation, is built through consistency.
India has reached an inflection point in its GCC journey. The talent proposition has already been established, and global enterprises are increasingly expanding beyond traditional hubs such as Bengaluru and Pune into cities including Ahmedabad, Jaipur, Coimbatore, Kochi and Indore in search of specialised engineering talent. As more mature economies confront similar demographic and workforce challenges, India’s opportunity is no longer just to host global capability centres, but to shape what the next generation of GCCs looks like.
Cost arbitrage may have brought India into the global GCC conversation. It will not define what comes next. The next chapter will be shaped by trust: trust in India’s engineering talent, trust in its institutions and trust that the policy environment will remain as dependable as the capabilities global enterprises increasingly come here to build.
