GIFT City, an acronym for Gujarat International Finance Tec-City, is a project initiated by the Indian government to transform India into a global financial and technological hub. It is a central business district with an area of 15.5km2 under construction in Gandhinagar district in Gujarat, India. It is India’s first operational Greenfield Smart City and an International Financial Services Centre (IFSC) under Special Economic Zone Act, 2005 (“SEZ Act 2005”).
GIFT City aims to provide a world-class infrastructure and a conducive ecosystem for businesses to flourish. With its state-of-the-art facilities, regulatory framework, and sustainable development, GIFT City has the potential to propel India’s growth in the financial and technological sectors. This essay delves into the key features, advantages, and potential impact of it on India’s economic landscape.
For reference, a Greenfield Smart City is an area that usually connects eco-friendly elements to modern infrastructure with the hopes of achieving the goals of sustainable development. As imaginable, structurally maintaining such a kind of project comes up with its own set of challenges such as huge assembling of framework and finding suitable land.
Further, an IFSC, governed by the authority that goes by ‘IFSCA’, is a center that aims to cater to customers outside the jurisdiction of the domestic economy (in this case, India). Such centers deal with flows of finance, financial products, and services across borders. Examples being Fund-raising services, Asset and Wealth Management, Global tax and Regional Corporate Treasury Management, etc.
Key Features and Infrastructure
GIFT City has several key features and a robust infrastructure that should distinguish it as a premier business destination. First, it offers a special economic zone (SEZ) with various tax incentives and exemptions to attract domestic and foreign companies. This not only provides a competitive advantage for businesses, enabling them to operate with reduced costs but also increases their efficiency. Second, GIFT incorporates a modern and sustainable urban planning approach – i.e., techniques such as: predicting population growth, zoning, geographic mapping and analysis, analysing park space, surveying the water supply, identifying transportation patterns, recognizing food supply demands, allocating healthcare and social services, and analysing the impact of land use., featuring green buildings, ample green spaces, and eco-friendly initiatives. This not only enhances the quality of life for residents and employees but also emphasizes India’s commitment to sustainable development.
GIFT City houses world-class financial institutions which provide a platform for international banking, insurance, and capital markets. The IFSC enables Indian businesses to seamlessly connect with global markets, attracting foreign investment and promoting financial integration. Additionally, GIFT boasts a state-of-the-art technology park, equipped with advanced infrastructure and connectivity, attracting IT (Internet Technology) and technology-based companies to set up their operations. The availability of modern amenities, such as high-speed internet, data centres, and research facilities fosters innovation and promotes India’s digital economy.
GIFT City provides a one-of-its-kind fund for a single family or entities under the family’s control to fifty percent of its net worth in, called the “Family Investment Fund (FIF)”, which allows pooling of money from corporate entities holding indirectly or directly at least 90% substantial interest. Individual investors, however, are only allowed to invest up to $2,50,000, subject to a TCS of 20%. It is a powerful tool for building a diversified portfolio, including varieties of international options, and having to amass a minimum corpus of $10 million within 3 years of establishment. Additionally, it has access to banks situated in GIFT, giving it leverage if need be.
Its story
Although GIFT City is appealing on many fronts, it is not a master of any. Top leaders much prefer big names such as Mumbai, Bengaluru, Singapore and Dubai, meanwhile C-suite leaders are not offered nearly enough incentives to establish a way of earning their living within the city.
Further, there is a lack of a proper social ecosystem and corporate life. Even though GIFT City also now has a regulator, IFSCA and an international arbitration centre, and further proof that the tax leeway provided to the investors and companies in the IFSC is deemed to be on par with the other offshore centres, evident with how many banks, brokers, and other entities have operations set up, the entry and exit are not as warm and welcoming as one would hope, and certainly not enough to prompt foreign investors.
Activity in the GIFT city, especially in the stock exchanges have not yet livened up. To put it short, GIFT has established itself regarding all the prerequisites but need yet truly make these perquisites its own and truly utilise them to the maximum potential. As of now, the only thing GIFT to require is time.
However, not all hope is lost. Given the recent fall of the Silicon Valley Bank, i.e., one of the self-acclaimed best banks in America, the resulting effect on India’s IFSC is promising. The Asian PE/VC (Private Equity/Venture Capital) and start-up market have no choice but to look for an alternative from the after-effect of the fall alongside a global liquidity crunch and increasing interest rates.
One such alternative, would be none other than to rely on leading International Finance Centres across the globe for support. However, given that amongst the leading IFCs and their own situations that may view them in an unpreferable front, India’s IFSC at GIFT City with its minimal interference from government authorities and less complex regulatory framework would naturally emerge as the best option to help navigate affected depositors.
Additionally, our central bank, the Reserve Bank of India, infused liquidity of Rs. 82,650 crores into the banking system, borrowed by Indian banks at a weighted average rate of 6.53% via VRR (Variable Rate Repo). This infusion by RBI truly comes at an opportune time. GIFT City houses the largest public and private sector banks, making it the perfect time for investment.
This might be what GIFT City needed to wait for all along, and if the opportunity is used well, it is sure to lead amongst the IFCs globally.
Conclusion
GIFT City stands as a shining example of India’s vision to establish itself as a global financial and technological powerhouse. With its world-class infrastructure, regulatory framework, and sustainable practices, GIFT attracts domestic and international businesses, stimulating economic growth and development. By providing tax incentives, a supportive ecosystem, and a robust infrastructure that distinguishes it as a premier business destination, it not only provides a competitive advantage for businesses, enabling them to operate with reduced costs but also increases their efficiency. Furthermore, green buildings, ample green spaces, and eco-friendly initiatives not only enhances the quality of life for residents and employees but also emphasizes India’s commitment to sustainable development.
(This article is written by Haifa.F , Audit executive at R V K S And Associates)