The India advantage: a decade of offshoring growth and expanding opportunities
Over the past decade, India has evolved from a cost-effective offshoring centre into a value-adding captive hub.
3 minutes to read
The country has diversified into new domains, such as human resource outsourcing, sales, and supply chain management, while establishing new research and development facilities. India's focus on improved business processes and digital transformation initiatives has enabled it to align with the changing needs of global businesses, transforming it into a centre of excellence. This shift has been characterised by an emphasis on cutting-edge technologies, including artificial intelligence and machine learning (AI/ML), robotic process automation, and big data.
With its offshoring industry experiencing significant growth, it accounts for 57% of the global market. The sector encompasses a broad range of services, such as IT outsourcing, research, knowledge process outsourcing, and other service process outsourcing.
India is a leading destination for global firms seeking end-to-end business offshoring solutions, hosting approximately 42% of such companies. The offshoring industry has substantially contributed to the Indian economy, with service exports accounting for nearly 60% of the country's total service exports in 2023. Over the past decade, the sector has experienced remarkable growth, with service exports increasing from USD 63 billion in 2013 to USD 185.5 billion in 2023 – a staggering threefold growth.
In recent years, India's office real estate market has witnessed a surge in demand from Global Capability Centers (GCCs) seeking growth opportunities within the global offshoring industry. The GCC landscape in India has experienced significant expansion, with over 1,580 centres established across the nation by 2023. As a result, GCCs now account for a substantial 35% share of office leasing in the top eight Indian cities in 2023, marking a significant increase from 25% in 2022. This growth signifies a shift in the offshoring industry, as GCCs have become key occupiers, surpassing third-party IT outsourcing.
Positive business sentiments and a strong entrepreneurial spirit among industry leaders have reinforced confidence in India's real estate market. Over the last decade, this has led to a substantial infusion of USD 52.5 billion in private equity. In 2023, India recorded an overall leasing volume of 27.3 million square feet (sqft) in the offshoring industry, marking a remarkable 26% increase compared to the previous year.
Top three drivers
Abundant Talent Pool
India boasts a vast talent pool with an annual median salary of USD10,394 in the offshoring industry. The country offers a rich reservoir of skilled professionals with a population of 146 million holding university degrees or higher.
Competitive Office Rentals
The country offers competitive occupancy costs, with real estate expenses lower than those in the prominent global markets.
Favourable Government Policies
The Indian government’s favourable economic policies, formalising economic zones, and robust physical and digital infrastructure initiatives
Outlook
India's embrace of cutting-edge technologies, such as AI/ML, robotic process automation, and big data, has unlocked significant growth potential across various sectors and industries. The country's "Digital First" vision has established it as a global frontrunner in digital transformation, positioning it among the early adopters and innovators in this arena.
Increased confidence in India's economic stability has further solidified its reputation as the preferred geographic location for establishing offshore units. India has consistently topped various index rankings for global offshoring locations, including Kearney's Global Services Location Index 2023, a testament to its robust offshoring ecosystem.
With the current pace of construction, India is projected to reach the one billion sqft mark in office stock by 2025, primarily driven by GCCs and supplemented by third-party IT outsourcing. While adopting new technologies may pose challenges, it will also accelerate India's journey towards becoming a significant economic and technological powerhouse.
As India aims to achieve developed nation status by 2047, its future appears promising, with sustained efforts, strategic investments, and adaptability to the evolving global offshoring landscape as key factors for success.