With fresh incentives meant to entice international brokers and businesses, Indian Prime Minister Narendra Modi is attempting to revitalise a ten-year-old proposal to establish a new financial hub in his home state of Gujarat.
In 2011, while Modi was Gujarat’s chief minister, the GIFT City project was introduced on the outskirts of Ahmedabad, beating out Mumbai as the location for a new tax-neutral financial hub for banks, exchanges, and investment funds.
Since then, approximately 400 organisations, primarily banks, have established themselves in the contemporary office buildings dotting the little city, providing employment for roughly 20,000 people. However, the hub has not been able to grow into a vibrant financial ecosystem with strong market turnover.
At an investment conference held in the city last weekend, Modi called for the location to be transformed into a “new age financial services and technology nerve centre” in an effort to revitalise the area.
K Rajaraman, chairperson of the International Financial Services Regulatory Authority (IFSCA), which oversees financial services in GIFT City, told Reuters that new regulations, which are expected to go into effect in April of next year, will permit direct equity listing of Indian companies at GIFT City for those that aren’t currently listed at Indian exchanges.
Four exchange and regulatory authorities reported that exchanges are in discussions with six technology businesses to begin direct listings at GIFT.
“Without listing on more costly foreign bourses, this will give Indian companies the option to raise funds in dollars,” stated V. Balasubramanian, the head of the NSE’s International Exchange, which is headquartered in Garden City.
Additionally, foreign brokers will be able to trade without physically being present on GIFT City markets.
The GIFT Nifty, which started trading in July, is currently the only equities product that is actively traded in the jurisdiction.
The biggest enterprises in GIFT City are currently banks, whose branches book Indian corporations’ overseas borrowings.
These loans have a 20% withholding tax in India, however if they go via GIFT City branches, they are exempt from taxes for ten years.
Over 90% of the $52 billion in total banking assets are loans, according to regulatory data.
According to data from the regulatory body, around 80 funds with commitments totaling $24 billion have also established themselves in GIFT City. These funds include both offshore hedge funds investing in India and Indian funds investing abroad.
Interest has been piqued by the prospect of tax exemptions on company revenue, tax-free transfers of overseas investments, and more lenient restrictions on Indian funds investing in foreign assets.
“Why go to Mauritius when you have all the advantages of an offshore jurisdiction at GIFT and the benefit of being in close proximity to India?” stated Richard Prattle, CEO of the GIFT City-based hedge firm True Beacon.
The city is nevertheless having trouble generating the kind of buzz about lifestyle that attracts professionals and capital to financial centres like Singapore or Dubai, despite some of those breaks.
“It feels like the early days of Canary Wharf,” expressed Mathias B. Pontoppidan, who was in town to look for business opportunities. Pontoppidan is employed at the Danish ESG advisory firm Pontoka.
New glass-fronted structures stand on desolate plots of land; there are no pubs or restaurants in a state where Indian people are not allowed to consume alcohol. Public transportation options are also scarce.
The chairman of GIFT City, Hasmukh Adhia, admitted there was a deficiency in social infrastructure.
He stated, “We are addressing it in phases.”
Many of the area’s newly constructed homes are still empty since residents choose to live in neighbourhoods with greater conveniences, such as department stores.
“Why is it being compared to Hong Kong, Singapore when we can’t reach here without the aid of private transport?” stated Anil Shah, a director of the Association of National Exchange Members who works at GIFT City.
