India’s tier-2 cities are emerging as the next frontier for Japanese investments, with companies increasingly considering locations beyond Bengaluru and Hyderabad for setting up Global Capability Centres (GCCs), according to a Deloitte report.
The report, titled India’s Strategic GCC Play for Japanese Enterprises, says cities such as Ahmedabad, Jaipur, Coimbatore, Kochi and Indore are gaining traction due to their lower operating costs, expanding talent pools and attractive state government incentives.
Tier-2 cities gaining momentum
While India’s GCC landscape remains heavily concentrated in metropolitan cities, the report notes that nearly 95 per cent of existing centres are still located in tier-1 cities. However, the shift has already begun, with around 5 per cent of new GCCs established during 2025-26 choosing tier-2 locations.
These emerging hubs offer a combination of cost efficiency and access to specialised talent in digital technologies, cloud computing, engineering and healthcare services. They also help companies avoid the intense competition for skilled professionals and rising salary costs seen in larger technology hubs.
Lower costs and stable workforce
According to Deloitte, setting up a GCC in India can cost 30 to 40 per cent less than in many alternative global locations. Smaller cities also offer the added advantage of lower employee attrition and a more stable workforce—factors that align well with Japanese companies’ long-term approach to talent development.
State governments are also encouraging investments through dedicated GCC policies. Karnataka, Gujarat, Maharashtra, Rajasthan, Tamil Nadu and Andhra Pradesh have introduced incentives such as capital subsidies, rental support, patent reimbursement and exemptions from electricity duty to attract knowledge-driven businesses.
Opportunity for regional growth
Experts believe the trend could significantly boost regional economic development by creating high-value jobs, expanding research capabilities and strengthening local innovation ecosystems.
While Bengaluru is expected to remain India’s leading technology hub, the report suggests future GCC growth will increasingly depend on how effectively tier-2 cities develop infrastructure, skilled talent and business-friendly ecosystems to support global enterprises.