Gujarat International Finance Tec-City, abbreviated as GIFT City, is India’s very first Greenfield Smart City. The initiative emanated with the notion of creating a global financial centre to rival London, New York, and Hong Kong. Located on the banks of river Sabarmati, GIFT City connects the Business Capital (Ahmedabad) with the Political Capital (Gandhinagar) of Gujarat State.
Integration of Economy
Over the past three decades, multiple Offshore Financial Centres (OFC) have emerged and attracted significant business. At the broadest, an OFC is any centre or jurisdiction that facilitates offshore financial activities. The term offshore does not imply the geographic location; rather means the treatment of the financial centre as a foreign unit. The foreign investors would not be liable to the tax rules & regulations of the home country where the OFC is located. This acts as a major perk for luring investment into the OFCs.
As of date, a significant chunk of trading, lending and investing activities in India are being operated from other jurisdictions. On the progressive front to this, the government of India operationalized International Financial Services Centre (IFSC) at GIFT Multi Services SEZ in April 2005.
The Business Platform at GIFT City can be divided into two zones:
Domestic Tariff Area (DTA)
- Meant for domestic companies
- Subject to Indian laws & regulations
Special Economic Zone (SEZ)
- Meant for international companies
- Promotes exports and foreign investments
- First and major part of the SEZ comprises of IFSC for export of financial services
- The second part of the SEZ deals with export of other services
Multiple industries such as the banking, insurance, pharmaceuticals, fintech, automobiles, etc shall benefit from the DTA. Apart from this, the IFSC units enjoy a muckle of benefits ranging from an exemption of setting up costs to tax benefits. A few of them have been listed below –
Another major perk is that IFSC units are treated as non-residents, and hence they are exempt from currency control regulations. Also, transfers of specific securities listed on IFSC are not treated as transfers and, therefore, are not liable to tax in India. These strategies are planned and structured rigorously to lure foreign investors.
IFSC can aspire to be the “global laboratory for fintech” by emerging as the leader in regulations governing financial services, setting high standards for rules, and becoming the unanimous choice of the world.
The IFSC has shown remarkable progress since its inception:
√ Both NSE and BSE (onshore financial centres) have integrated their services at IFSC by offering 22 hours of trading services
√ The daily average trading volume at IFSC has touched $15 billion
√ External Commercial Borrowing and other lending transactions have reached more than $110 billion
IIBX at GIFT City
For the most prolonged period of time, India has been one of the world’s largest buyers of yellow metal, Gold. As per the latest statistics, India ranks the second largest consumer and importer of Gold, purchasing around 800-850 tonnes per annum. Despite contributing 25% of the total gold demand worldwide, India does not account for being a global price setter in the gold market.
This led to the foundation of Indian International Bullion Exchange (IIBX) at GIFT City, which shall ensure standardisation, quality assurance and integrity. Until now, RBI had permitted only certain qualified banks and nominated agencies to import and trade in gold with domestic jewellers. Henceforth, the introduction of IIBX shall not only ensure price transparency for gold but also lure foreign traders to Indian shores.
China, the world’s biggest consumer and importer of gold, runs a similar bourse which serves as the primary place for purchasing and selling both imported and domestic gold. IIBX, established along the lines of Shanghai Gold Exchange and Borsa Istanbul, aspires to make India a regional hub to ease bullion flows into the country. IIBX envisages expanding its operations by undertaking Silver Trading in the future.
The Gujarat International Finance Tech (GIFT) City celebrates wealth & vision and is an important gateway to connect to global opportunities.
Will GIFT City Overtake Mumbai as India’s Financial Capital?
“Cities rise and fall” describes the corporate world most aptly. A major chunk of US outsourcing services are centered in Ahmedabad. GIFT City can potentially be the glamour magnet and is a wake-up call for Mumbai to mend its crumbling infrastructure to secure the tag of “financial hub”. Even though GIFT City has been gaining quick recognition, it does not pave way for all corporates to move post haste there, but it surely emerges as a tough competition for Mumbai.
Author: Yashvi Mehta | Associate Consultant | Email: yashvi.mehta@masd.co.in
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