Introduction: The International Financial Services Centres Authority (IFSCA) has received a comprehensive report from a Committee of Experts. This report focuses on the critical theme of ‘Onshoring the Indian Innovation to GIFT IFSC.’
Background: The Committee of Experts, chaired by Shri G. Padmanabhan, the Former Executive Director of RBI, was specifically constituted by the IFSCA. Its core objective was to explore the reasons behind the migration of Indian startups abroad and suggest strategies to curb this externalization in the future. The committee’s constitution can be viewed here.
Key Findings and Recommendations:
1. Understanding Startup Migration: One of the pivotal tasks of the committee was to decipher why Indian startups prefer to move out of the country. They also delved into strategies that could persuade these externalized startups to return to their homeland.
2. Establishing GIFT IFSC as a Global Fintech Hub: The committee has proposed various recommendations essential for transforming GIFT IFSC into a renowned global Fintech hub. They have highlighted the need to foster a conducive environment within the IFSC, in line with international best practices, to support the evolution of Fintechs with a global vision.
3. International Innovation Hub Development: Challenges related to the development of the International Innovation Hub at GIFT IFSC were also outlined, with corresponding measures being suggested to overcome them.
4. International Comparisons: The report offers a meticulous comparison of India’s strategy concerning holding company setups with counterparts like Singapore, the Netherlands, and Delaware, who have excelled in this arena.
5. Recommendations for Stakeholders: Various actionable insights have been given for stakeholders including ministries and regulatory bodies. These are aimed at effectively implementing the onshoring of Indian innovation to GIFT IFSC.
6. Tax and Regulatory Alignments: A crucial proposal revolves around the alignment of tax and regulatory norms within IFSC, benchmarked against global best practices. This alignment will encourage and back the establishment of holding company structures.
7. Factors Influencing Overseas Flipping: The committee has taken an in-depth look at the myriad factors persuading Indian founders to flip to international jurisdictions.
Conclusion: The committee’s findings and recommendations are poised to stimulate discussions within the ministry, echoing the Hon’ble Prime Minister’s ambitious vision for India’s economic landscape. Shri G. Padmanabhan expressed his heartfelt gratitude to IFSCA for entrusting the committee with such a pivotal task, and the Chairperson of IFSCA commended the committee for its exhaustive recommendations.
To delve deeper into the committee’s findings, access the full report here.
International Financial Services Centres Authority
Report of the expert committee on ‘Onshoring the Indian Innovation to GIFT IFSC’ submitted to IFSCA
A Committee of Experts to ‘Onshoring the Indian Innovation to GIFT IFSC’ constituted by International Financial Services Centres Authority (IFSCA) submitted its report to Chairperson, IFSCA on August 14, 2023. The committee was chaired by Shri G. Padmanabhan, Former Executive Director, RBI. The committee members comprised representatives from leading Venture Capital funds, Startups, Fintechs, Law firms, Tax firms and other domain experts and the constitution of committee can be accessed through the link: https://ifsca.gov.in/IFSCACommittees
The main focus areas of the committee were directed towards understanding the reasons for shifting of Indian startups outside India and suggestions to avoid externalization of startups in the future and also to persuade startups that are presently externalized to redomicile back.
The committee has provided its recommendation that are critical to the development of GIFT IFSC as a global Fintech Hub, besides suggesting measures to encourage new Fintechs to have global outlook to set up their commercial presence in GIFT IFSC. The committee also has identified challenges and recommended measures for the development of the International Innovation Hub at GIFT IFSC. The report has suggested various measures/ action points to be undertaken by various stakeholders including ministries, regulatory bodies and others in implementing the idea of onshoring the Indian innovation to GIFT IFSC.
The committee report offers a comprehensive comparison of India’s approach to holding company setups with other leading jurisdictions like Singapore, the Netherlands, and Delaware , known for successfully implementing such setups. By highlighting the manifold advantages and addressing potential challenges associated with holding company regimes, the report unveils the immense potential of reverse flipping to drive India’s economic development to great heights. The Committee has inter-alia recommended aligning the tax and regulatory laws within the IFSC with international best practices, to create an environment that actively incentivizes and supports holding company structures. The committee has also examined in the report several push-pull factors are responsible for Indian founders flipping to overseas jurisdictions.
The Committee is of the view that the insights presented in the report will help drive dialogue in the ministry and will contribute to achieving Hon’ble Prime Minister’s grand vision of making India a 5 trillion-dollar economy and a global powerhouse. The Committee Chair Shri G. Padmanabhan, on submission of the report expressed his gratitude to IFSCA for affording an opportunity to work on the extremely topical issue.
Chairperson, IFSCA thanked the committee of experts for their comprehensive recommendations.
The report of the committee can be accessed through the weblink:
August 21, 2023