India is moving beyond call centers and IT support – but can it work?

India is moving beyond call centers and IT support – but can it work?

For years, multinational companies have set up labor-intensive operations in India involving services such as IT support, call centers or mobile app development.

Despite being one of the fastest-growing economies in the world, India’s position in the global value chain remained weak.

Global value chains are activities that often involve multiple countries across several regions. Many everyday products, such as cars and smartphones, involve global value chains, from their design and sourcing of raw materials to assembly and distribution.

Today, nearly 70% of international trade involves global value chains. However, India’s position in the global value chain is shifting due to government incentives and a digitally savvy economy. 

Adit Jain, the founder of IMA India, a market research firm, said: “When we look at global value chains, two and a half decades ago, all of it [in India] was focused on shared services, back-office accounting, grunge work that could be cheaply done because we have a large, skilled, educated population.

“But then, slowly, businesses started realizing that, hang on, we can actually do a lot more; we can set up high-end research and development.”

According to a joint survey conducted in 2022 by EY and the Confederation of Indian Industry, more than 70% of multinational corporations plan to invest in the country in the next 3-5 years. 

Rajat Dhawan, a managing partner at global consulting firm McKinsey, said: “By our estimate, many of the Fortune 500 companies have 50% to 60% of their global engineering and [research and development] work, they’re getting it done in India.”

Tech giants like Amazon and Microsoft have poured billions of dollars into data centers, while other companies like Verizon, Nokia, and Cisco are doubling down on India.  

Dave West, Cisco’s APAC president, says that the ease of doing business in India has improved over the company’s 28-year history in the country. 

“We’re looking at countries that will help us scale up and deliver services for the market. At some point in calendar year ’24, you will see Cisco manufacture in southern India,” West said.

“We’re going to be manufacturing our best in class, routers and switches.” 

According to West, Cisco aims to yield a billion dollars out of this investment in the Indian market.  

“We’re manufacturing in India, not for India, because it will satisfy the domestic market, but it’s also satisfying and delivering capabilities and services from India to the rest of the world,” West added.