The Transformative Economic Impact of Global Capability Centers (GCCs) in India

Noida, Uttar Pradesh Oct 3, 2024 (Issuewire.com) – As the Global Capability Center (GCC) sector in India continues to grow and evolve, its economic contributions are becoming increasingly significant. A comprehensive study reveals the composite impact of GCCs on the economy through three primary channels: direct, indirect, and induced effects. This evaluation framework provides a clearer understanding of the value that the GCC sector brings to India.

Economic Impact Breakdown

The economic impact of GCCs is measured in three categories:

Direct Impact: This includes the jobs, wages, and output generated within the core GCC ecosystem. Direct impact represents revenues from sales to parent organizations, forming the foundation of the sector’s economic contribution. It highlights the immediate economic benefits in terms of employment and income within the GCC sector.

Indirect Impact: This encompasses the revenue generated in the economy due to the production activities of suppliers and subcontractors working with GCCs. Essentially, it captures the ripple effects across the supply chain, where economic activity extends beyond GCC operations to related industries.

Induced Impact: This is the economic activity generated from the spending of wages by employees working within the GCC and its associated sectors. As employees spend their income in the wider economy, it creates additional jobs, wages, and output in other industries, thus stimulating further economic growth.

The Input-Output Analysis

The impact of the GCC sector has been analyzed using the input-output analysis model, an internationally recognized method pioneered by Nobel laureate Wassily Leontief. This model provides insights into the interdependencies between various sectors of the economy and calculates the overall impact of the GCC sector on national output and employment.

The study is based on input-output tables published by India’s Ministry of Statistics and Programme Implementation (MOSPI) and employment data from the National Sample Survey Organisation (NSSO). Research from the National Council for Applied Economic Research (NCAER) also contributes to this robust analysis.

The input-output analysis answers two critical questions:

What is the ‘indirect effect’ on the Indian economy of every US$1 output generated by the GCC sector?
What is the ‘induced effect’ on the Indian economy of every US$1 output generated by the GCC sector?

Key Metrics of Economic Impact

The total economic impact of the GCC sector is measured across several important metrics:

Direct Economic Impact: Gross output, gross value addition, direct employment generation, corporate tax contribution, and FOREX earnings.
Indirect Economic Impact: Indirect output, gross value addition, indirect employment generation, ancillary industry development, and business travel by parent organizations.
Induced Economic Impact: Induced output, gross value addition, and induced employment generation.

These indicators showcase the significant role that GCCs play in contributing to India’s overall economic growth, employment, and industry development.

As the sector continues to expand, GCCs will remain pivotal to India’s economic strategy, driving innovation, employment, and international collaboration. This transformative role ensures that the GCC sector will continue to be a cornerstone of India’s evolving economic landscape.

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