AI Can Derail GCC Story. Here’s What India Must Do

medium119761548Every morning, Arya, a code debugger at a global capability centre (GCC) in Bengaluru, reviews lines of code, hunting for elusive bugs that could derail a multi-million-dollar project. For years, such work has been a cornerstone of India’s services export boom. However, as AI accelerates at a breathtaking pace, Arya’s job, and by extension the entire GCC model, may be somewhat at risk. India needs to step up its game.In our book, Breaking the Mould, we argued direct services and services embedded in manufacturing have been and will remain a backbone of India’s growth story. Since then, Indian service exports have overtaken manufacturing exports, jumping from around 3% of global service exports in 2013 to 4.5% in 2024, while manufacturing exports have been stuck at around 1.75%.Value added in services exports is also significantly greater than in manufacturing, meaning more income is generated at home from every dollar of exports. Media reports suggest GCCs are ramping up hiring in 2025. However, to maintain its services miracle, India needs to worry constantly about how it can be lost.Foreign buyers focus on efficiency. For now, Indian workers provide value-for-money services, such as debugging code, writing algorithms, checking legal documents, or providing basic financial advice. Soon, the debugging work that requires Arya’s keen eye will be handled by an AI algorithm that’s faster and more accurate. Can Arya and those who follow him into the workforce be trained to add value to AI-provided services, or could algorithms replace them entirely?India’s services revolution started with fairly routine coding, business process outsourcing, and call centres. Value added in services has increased steadily: GCCs are much more than traditional back offices, they employ professionals in large numbers and some of their work involves significant skills, design and creativity. India must view the AI challenge now as the natural next step in the movement up this value chain.Graduates from Indian colleges often lack skills for specific jobs. The traditional approach, seen for example in IT firms, has been to train recruits for a few months in the narrow skills a job needs, before deploying them to projects.But the era of routine training may soon be over. The future calls for highly capable individuals who possess deep expertise, critical thinking and design skills, and an ability to adapt to rapidly changing tech. Mastery over language, mathematics, and specialised subject matter, will become essential for harnessing AI’s potential.For India to remain a global leader in high-skill services, its quality of human capital must be upgraded. This means radically transforming our education and research ecosystem. One of the biggest casualties of an over-centralised and underfunded higher education system has been the university — a crucial incubator for innovation.The “DeepSeek moment” in Jan 2025, when China released an AI chatbot nearly matching the performance of high-priced Western models, should serve as a wake-up call. Despite our past advantage in engineering and technical education, India now risks lagging behind in the race for the next big technological revolution.UGC, for instance, has long outlived its purpose. It needs to be replaced by a leaner, less bureaucratic body focused on accreditation and light regulation. Similarly, in medical and technical education, reforms are needed to break away from a culture of regulatory overreach and political patronage.Universities and research institutions must be allowed the freedom — and provided the resources – to experiment, innovate, and cultivate the next generation of thought leaders. Only by fostering an environment of openness and accountability can we equip our skilled workforce to not only survive but thrive in the age of AI.To that end, Anusandhan National Research Foundation is a welcome step. However, its corpus of funds is too small. Moreover, overfilling it with bureaucrats who are neither academic nor industry researchers will kill innovation. Recently, India’s ace badminton coach Pullela Gopichand teared up as he described plight of athletes and coaches seeking clearance for their own funds from petty bureaucrats. R&D risks the same plight — it has to be envisioned and implemented by experts.Both govt and industry must work together. Policymakers need to create an enabling environment where businesses are incentivised to invest in R&D, and workers have access to continuous learning opportunities.Industry leaders must recognise that investing in human capital is not a luxury but a necessity for long-term competitiveness. The narrative should shift from cost-cutting through automation to leveraging tech for enhancing human potential.Arya’s dilemma reflects the challenge millions of skilled workers in India face today. AI’s rise is inevitable, but its impact will be determined by our preparedness to adapt. The future of India’s services industry — and Arya’s role — will depend on collective ability to upgrade ambitions. It’s entirely possible for India to remain at the forefront of the global services revolution, but we must act now — improving quality of our human capital, reforming our education system, and fostering an environment of innovation.Rajan is a professor at University of Chicago, and Lamba an assistant professor at Cornell University