Global volatility no threat to India's GCC industry; sector to benefit in any economic scenario, says Deloitte Partner Rohan Lobo

Global economic volatility is unlikely to hurt India's Global Capability Centre (GCC) industry, as multinational companies are expected to expand operations in the country during both economic upturns and downturns, according to Rohan Lobo, Partner, Deloitte and Industry and Channel Leader - GCCs.

Global economic volatility is unlikely to hurt India's Global Capability Centre (GCC) industry, as multinational companies are expected to expand operations in the country during both economic upturns and downturns, according to Rohan Lobo, Partner, Deloitte and Industry and Channel Leader - GCCs. "If there is a significant amount of volatility, if there is difficulty, then because we are offering a cost arbitrage of around 2x, it is a driver of taking work from high expensive areas and bringing it into India where the cost savings are coming. So this is one sector where whether global volatility is rising and the economic condition is becoming tough, GCC is gaining because more work comes here because of the cost arbitrage," Lobo told ANI on the sidelines of CII's GCC Business Summit.

He said that it is a driver of taking work from high expensive areas and bringing it into India where the cost savings are coming. "In case the economy is booming, again we have a lot of fillip because a lot more money is available to do discretionary and non-discretionary technology investments. So this industry is facing a win-win situation. In either of the cases, the industry will boom," Lobo said.

He further said that the GCC industry is one industry that benefits if there is global volatility or if there is global plenty. So if there is a lot of stability and the economy is booming across the world, then there is a lot more money available to invest in technology, invest in new research and development and that is a driver of GCC. Responding to a question on whether renewed geopolitical tensions, including concerns over the US-Iran conflict, could affect the GCC industry, Lobo said India's competitive advantage enables the sector to benefit under different global economic conditions.

He said that during periods of global economic expansion, companies increase investments in technology, artificial intelligence (AI), engineering research and development (ER&D) and digital transformation, creating additional opportunities for GCCs. During periods of economic uncertainty, companies seek to optimise costs by shifting work from higher-cost locations to India, where they can leverage a large talent pool while benefiting from a cost arbitrage of around 2x, he said.

Lobo said GCCs have evolved from traditional back-office operations into strategic centres handling AI, data engineering, enterprise technology and innovation, integrating front-office, middle-office and back-office functions for global enterprises. He said AI is expected to automate around 15-20 per cent of operational work currently carried out by GCCs. At the same time, AI is expected to help organisations identify technical debt, broken customer journeys and technology issues, creating additional engineering, implementation and transformation work that is likely to come to India.

According to Lobo, the next phase of growth will also be driven by engineering research and development, physical AI, robotics and automation, requiring greater collaboration among companies and a stronger technology ecosystem. He estimated that GCCs could contribute USD 155-199 billion in direct gross value added (GVA) over the next three to four years. Including indirect contributions from service providers and supply chains, as well as induced economic activity through sectors such as real estate, healthcare and education, the overall economic impact could reach USD 450-600 billion, he said.

Lobo, however, identified the widening digital skills gap as the biggest challenge facing the sector. "The only headwind in this particular industry is that talent is a reason for many people to come here because we have talent at scale, but the digital skills gap is rising. So about 29-30 per cent there is a digital skills gap which is rising. If the entire skilling ecosystem doesn't keep pace, then we will have a lot of talent, but they won't be ready to be picked up by the GCC," he said.

He added that the government is conscious of the challenge and is taking steps to strengthen the skilling ecosystem. He also said the next wave of growth in engineering research and development, AI and physical AI would require industry, academia and the government to work together to build a stronger ecosystem. (ANI)