Why Are Tier-II and Tier-III Cities Becoming the Next Big GCC Hubs?

With over 1580 GCCs employing around 1.66 million plus professionals India is set to become the global center for Global Capability Centers (GCCs).These centers are no longer limiting themselves to Tier-I cities like Bengaluru, Mumbai, Hyderabad or Chennai. A new trend is rising, the GCCs are increasing their operations in Tier-II and Tier-III cities which marks a strategic shift in global enterprise thinking.

The Numbers Behind the Shift

Parameter	Tier-I Cities	Tier-II/III Cities
Average Annual Rental (per sq.ft)	₹90–₹150	₹30–₹60
Annual Attrition Rate	18–22%	8–12%
Cost of Living Index	90–100	40–60
Salary (Avg. for Freshers)	₹4.5–₹5.5 LPA	₹3.0–₹4.0 LPA
Internet Penetration (as of 2023)	90%	74% (and growing)
Engineering Graduates (2023)	15 Lakh+	65% from Tier-II/III regions

A report by Zinnov and NASSCOM suggests that by 2026, over 500 new GCCs are expected to be established in Tier-II/III cities. Notably, 30–35% of all new GCC investments in India over the past two years have targeted these emerging locations.

Why the Migration?

1. Cost Arbitrage & Real Estate Advantage

Metros are bursting at the seams—high rental costs, traffic, and real estate saturation make expansion expensive. By contrast:

• Office space in Coimbatore or Indore is up to 60% cheaper.
• Startups and MNCs save 35–40% on operating costs by relocating to smaller cities. 

2. Access to Untapped Talent

Over 70% of India’s college students study outside Tier-I cities.As stated by AICTE  approximately 8.5 lakh engineering graduates came from non-metro institutions in 2023 alone.

Infosys reported a 25% higher retention rate among freshers hired from Tier-II cities vs. Tier-I in FY2022–23.

3. Lower Attrition, Higher Stability

High attrition has plagued metro-based GCCs, especially in IT and analytics roles. The average attrition rate in Bengaluru’s tech sector was 20.3% in 2023, compared to 9.8% in Tier-II cities like Kochi and Bhubaneswar.

GCC Expansion: Top Tier-II/III Cities in Demand

City	Major GCCs Present	Strengths
Coimbatore	Bosch, Cognizant, Accenture	Textiles, IT, Engineering
Bhubaneswar	Infosys, TCS, Tech Mahindra	Smart City, IT Parks
Visakhapatnam	WNS, HSBC, Conduent	BFSI, Analytics
Indore	TCS, Impetus, Infosys	Education Hub, Real Estate Advantage
Mysuru	L&T, Infosys, Excelsoft	Low cost, High literacy, Tourism
Nagpur	HCL, GlobalLogic, Persistent	Central connectivity, Affordable housing

 

GCC Growth Trajectory: 

New GCCs Setup Year-wise (2018–2025 Forecast)

Year	Tier-I Cities	Tier-II/III Cities
2018	90	30
2019	100	45
2020	85	60
2021	95	90
2022	80	120
2023	75	160
2025*	90	250+

 

Case Study: Indore – The Central India’s Silicon Valley?

Before 2019:

• Limited IT exposure.
• Mostly manufacturing and education-focused economy.

After 2020:

• TCS Indore campus opened with 12,000+ capacity.
• Indore became India’s first water plus smart city.
• It has been ranked as #1 Cleanest City in India for the past 6 years in a row.
• Startup ecosystem doubled between 2020–2023, with over 900 registered startups now operating.

Accolade: 

In 2023, NASSCOM ranked Indore among the Top 5 emerging tech hubs in India.

Companies Betting on Emerging Cities

Company	City	Function
Walmart Labs	Vizag	Retail Data Analytics
Deloitte	Mysuru	Finance Shared Services
Accenture	Coimbatore, Jaipur	ERP, Cloud Services
EY	Kochi	Forensics & Audit Support
Capgemini	Salem, Tiruchirappalli	Digital Transformation Services

 

Challenges & What’s Being Done

Challenge	Solutions Being Implemented
Skill Gaps in AI, Cloud, etc.	Skilling initiatives via Skill India Mission & GCC academies
Infrastructure lag in some areas	Development of IT parks and SEZs, faster internet backbone
Lack of industry exposure	Internship & placement MoUs between companies & local institutions

 

Conclusion: The Silent Revolution of Small Cities

India’s Tier-II and Tier-III cities are no longer on the sidelines. They are fast becoming the new digital frontier, not only because of cost advantages but due to their vibrant youth population, government incentives, and strong work ethic.

For GCCs looking to scale sustainably, these cities are the new goldmines—affordable, ambitious, and agile.