Global Accounting Firms Are Now Looking To Expand In Tier -2 Cities, Set To Boost Local Economies.

The world’s major accounting firms are capitalizing on the growing demand for cost-effective back-office operations by investing in new facilities in smaller cities across India. Traditionally, large multinational corporations established operational centers in Mumbai, Delhi, and Bengaluru due to the availability of a large and affordable talent pool, particularly in the IT sector.

However, global demand for software has slowed, and challenges in bigger urban centers have emerged, such as rising costs, high attrition rates, and the slow return of workers to physical offices after the pandemic.

In response, accounting firms are now looking to tier-2 cities like Jaipur, Vadodara, Kochi, and Chandigarh to set up “global capability centers” for various industries. This shift is expected to create numerous professional opportunities, boost local economies, and potentially lead to higher salaries in these regions.

The growth of India’s business services exports has become a vital part of the country’s economy. Ernst & Young‘s report suggests that the number of “global capability centers” could rise from 1,600 to 2,400 by 2030, resulting in the creation of 2.6 million jobs and adding over $100 billion to India’s economy.

Deloitte, KPMG, and PwC are among the accounting firms significantly expanding their presence in India’s smaller cities. Deloitte, with over 100,000 employees in India, plans to hire an additional 50,000 staff members over the next three years, focusing on new towns.

PwC hired approximately 12,500 employees in the previous fiscal year and expects to hire a similar number this year. These expansions will alleviate concerns about slowing hiring in the manufacturing and IT sectors and provide relief to the labor market.

The Indian government, led by Prime Minister Narendra Modi, has set a target of $400 billion in service exports for the current fiscal year, representing a 25% increase from the previous year.

The president of the Services Export Promotion Council, Sunil Talati, predicts that total services exports could surpass goods exports within the next five years, reaching $750 billion. The rising wages, increased demand for office space, and the initiation of new courses in educational institutions in smaller cities support this optimistic projection.

So what is attracting global accounting firms to smaller Indian Towns?

As global demand for cost-effective back office operations grows and smaller towns move up the economic value chain, large multinational corporations are recognizing the potential of setting up operations in tier-2 cities in India.

This shift not only benefits the companies by reducing costs and tapping into a skilled workforce but also brings significant advantages to the local communities, including job creation, economic growth, and enhanced opportunities for the residents.

Increased Cost Savings and Business Efficiency,
Major global firms can significantly reduce their operational costs by establishing operations in smaller cities. These cities offer lower real estate prices, reduced overhead expenses, and competitive labour costs compared to larger metropolitan areas. As a result, companies can achieve more significant cost savings while maintaining operational efficiency, ultimately contributing to their bottom line.

Access to Skilled Talent Pools,
Smaller cities in India are witnessing a rise in the availability of skilled graduates in various disciplines, including accounting, engineering, and science. The transition of global firms to these towns allows them to tap into these talent pools and leverage the expertise of local professionals. This not only enhances the quality of services offered by the companies but also provides a platform for local talent to gain exposure to global work practices and opportunities, fostering professional growth.

The Advantages –

Job Creation and Economic Growth,
Establishing “global capability centers” in smaller cities creates numerous job opportunities for local residents. As major global firms expand their operations and hire professionals from the area, the unemployment rate decreases, and individuals can access stable employment and income. The influx of jobs, in turn, stimulates economic growth in the region, as increased disposable income leads to higher consumer spending and improved living standards.

Infrastructural Development and Ancillary Services,
The presence of major global firms in smaller cities acts as a catalyst for infrastructural development. These companies often require reliable transportation, communication, and utility services, leading to improvements in the local infrastructure.
Additionally, the demand for ancillary services such as food, housing, healthcare, and education increases, prompting the growth of supporting industries. As a result, local businesses and service providers flourish, contributing to the region’s overall economic development.

Social and Cultural Upgrades,
The transition of major global firms to smaller cities brings about positive social and cultural changes. The infusion of diverse talent from different regions and backgrounds enriches the local communities, fostering a cosmopolitan environment. Moreover, the presence of globally renowned companies promotes knowledge sharing, professional development, and the adoption of best practices, uplifting the overall work culture and skill levels within the region.

The Last Bit, The expansion of global accounting firms into smaller cities in India has the potential to transform local economies and provide significant employment opportunities.
As large multinationals set up “global capability centers” in tier-2 cities, the availability of skilled graduates and the rise in wages attract professionals and boost consumer spending.
This trend not only supports the government’s target of increasing service exports but also diversifies economic growth beyond traditional urban centers. As the accounting industry thrives in smaller Indian cities, it reinforces the potential for further development and investment in these regions.