Nestled in the arid lands of north-west India sits Gujarat International Financial Tec-City – also known as GIFT City – the country’s most ambitious financial project to date.
In a country known for its onerous red tape and strict capital controls, the special economic zone aims to be a global financial hub along the likes of Singapore and Dubai, and it is already off to a flying start.
Drawn by tax incentives and accommodative regulations, over 700 organisations have flocked to the city, including over 30 banks, with 10 funds registering every month, including sovereign wealth funds and insurers.
While the project was launched 2007, momentum has gathered pace in recent years with the Global Financial Centres Index ranking GIFT City at 52nd position, up from 92 three years ago. Strikingly, it now ranks above Mumbai.
Tax incentives, such as a 100% direct tax holiday for 10 years, exemptions from stamp duty and commodity transaction taxes, inevitably make GIFT City an appealing destination.
Already a vibrant hub for derivatives trading, GIFT City is increasingly playing an important part in offshore debt financing for Indian corporates. Lower withholding tax rates for bonds and loans originating from the centre are cutting borrowing costs, creating funding opportunities for all.
Prime Minister Narendra Modi, a long-time champion of GIFT City, has declared that the city will play a key role in India’s US$10trn green transformation to reach net zero by 2070. This has led to almost 40 bond issuances of green, sustainable, social and sustainability-linked bonds, and the hub provides an easy way for foreign investors to buy into India’s sovereign green bonds too.
One of the main reasons for GIFT City’s progress has been the collaborative and market-friendly approach of the International Financial Services Centre Authority (IFSCA), which has established comprehensive and accommodative regulations.
Recently, regulators have brought in a framework for short-term borrowings through commercial paper and certificates of deposits. And in an effort to inject much-needed liquidity in the bond market, regulators are also working on developing a repo market.
Ultimately, one of the biggest draws of GIFT City is the Indian economy itself. As the country pursues its ambition to become a US$5trn economy, GIFT City will play a major role in funding Indian companies looking offshore and multinationals looking onshore.
While GIFT City presents a compelling narrative, the realities on the ground still present some challenges. Entertainment options in the area are limited, though increasing, which can be a factor when trying to attract and retain global talent.
Yet GIFT City’s potential is undeniable. With continued investment in infrastructure, the development of a dynamic social scene and strategic policy refinements, GIFT City is set to be a gateway from India to the world.
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