Unwrapping Modi’s GIFT
Modi’s pet project, the Gujarat International Finance Tec-City (GIFT City) is a groundbreaking project that is transforming the financial services landscape in India. Situated in the heart of Gujarat, GIFT City is India’s first International Financial Services Center (IFSC) and is poised to become a hub for global finance and investment.
With a focus on attracting financial services and technology companies from around the world, GIFT City offers a unique combination of favorable regulations, world-class infrastructure, and a skilled workforce, making it an attractive destination for businesses looking to expand in India.
It offers a wide range of financial services, including banking, insurance, investment management, and more. The IFSC provides a supportive regulatory environment that enables financial institutions to operate on a level playing field with their global counterparts, offering a full range of financial products and services to clients both in India and abroad.
One of the key advantages of is its world-class infrastructure, which includes a state-of-the-art telecommunications and data connectivity system, robust power supply, and efficient transportation links. This infrastructure provides a reliable and stable platform for businesses to operate and grow. In addition to its infrastructure, GIFT City also offers a favorable tax environment and a range of incentives for businesses. This includes a favorable tax regime, investment subsidies, and tax holidays, making it an attractive destination for businesses looking to invest in India.
GIFT City has been designed to attract the world’s leading financial institutions, providing them with a platform to access the Indian market and reach out to a global client base. The IFSC also provides a hub for talent, with a range of universities and training centers offering education and training in financial services and technology.
The International Financial Services Centre (“IFSC”) situated in the GIFT city is deemed to be a quasi-foreign territory from the lens of Foreign Exchange Management Act, 1999 however a domestic area under the tax regime. The economic objective of setting up specified territory lies in the benefits an IFSC jurisdiction provides in the form of free flow of foreign transactions and investor confidence; this setting up is commonly termed as onshoring the offshore.
In order to materialize the underlying objective, a specific regulatory framework has been designed which includes the incorporation of the following major entities:
- Finance Companies: The concept of Finance Companies are similar to the concept of non-banking financial companies, the unified regulator IFSCA has issued regulations specifically dealing with the concept of Finance Companies.
- Fund Management Entities (‘FMEs’): FMEs are entities which act as pooling vehicles for various kinds of investors, this concept of FME’s is equivalent to the concept of Alternative Investment Fund.
- Banking Units: As far as Banking Units are concerned, the IFSCA has outlined a framework through which Indian banks or foreign banks can set up their shop in the form of branches in IFSC GIFT City.
One of the pivotal challenges GIFT city faces is being compared to Mumbai. How does an upcoming city compare to the perception that Mumbai has created through its history?
To begin with, Mumbai has a well-established business eco system for major companies and industries. It has a life which is more than just financial services infrastructure. Few cities come even close to matching the life of Mumbai, however stressful it may be to live, and it remains an attractive destination. Top talent goes to cities that provides access to multiple opportunities outside their sectors. Mumbai has been built up over a long time, and has the corporate office of every top FMCG, consulting, infrastructure, retail company in India.
Overall, while Gift City is a promising new development, it still differs from Mumbai in several important ways. These differences may impact the overall experience of living, working, and doing business in the two cities. However, with its modern infrastructure and development, Gift City has the potential to become a major player in India’s economic and business landscape.
Here, capital advisors can play a crucial role in shaping the future of International Financial Services Centre (IFSC) by providing strategic advice to clients looking to invest in the IFSC. They can help clients navigate the complex regulatory framework and provide insights into the local market conditions. Additionally, capital advisors can help raise capital for projects in the IFSC and assist in the development of new financial products and services. By leveraging their expertise and networks, capital advisors can help attract foreign investment and promote the growth of the IFSC. As the IFSC continues to evolve, capital advisors will play an increasingly important role in shaping its future.
The GIFT city is no doubt an ambitious project, given that it is the brainchild of the Prime Minister. The city envisages great ideas of integrating both financial and social infrastructure that aims to share a seat amongst the Advanced Economies. Although bringing about such a structural change will take both time and a possible collapse of Mumbai as a financial services hub or in the best alternate scenario, the GIFT IFSC runs parallel to Mumbai.
