GIFT City: India's gift to the financial world

New Delhi [India], April 25 : A major decision was taken in 2015 to develop a robust financial sector in India. This was actualised with the establishment of India's first international financial services centre namely Gujarat International Financial Tec-City (GIFT City).

The location of GIFT City works to its maximum advantage. Built in the vicinity of Gandhinagar and Ahmedabad, the trio stands to provide economies of scale in terms of developing an ecosystem for business, education, exports, international finance and foreign investment.

Essentially a Special Economic Zone, GIFT City caters to a multitude of finance-related services like banking, bullion, insurance, ship leasing, fintech and lending. With its unified regulatory authority, competitive tax regime, and lenient company laws, India's GIFT City is at par with other prominent financial centres of the world.

GIFT City stands as a competitor to the existing economic system characterised by the strong dominance of the advanced economies of the West. As the Western markets, particularly the US, are subjected to high levels of risk in recent times, GIFT City is emerging as an important alternative, especially for Indian startups.

The necessity of the GIFT City in the financial landscape of emerging economies can be understood well in the backdrop of the recent Silicon Valley Bank (SVB) collapse. SVB showed low levels of diversification in terms of the client industry it invested - majorly in the tech sector - and the depositors. As soon as the tech sector started experiencing a bumpy ride, investors successively started withdrawing more and more money, compelling the bank to sell its treasury bills to raise funds to meet depositors' demand.

In general, the money invested in such banks is subjected to low levels of diversification with quick-trigger deposits in highly inflationary situations, emaciating the value of long-term bonds - all happening in the ecosystem marked by weak bank rules and regulations and lack of trust among the depositors.

This is where the Indian GIFT City shines. With a robust Indian banking system showing rapid growth and resilience, GIFT City has become an important resort for start-up owners, venture capitalists and investors. These stakeholders have recently described their experience with the US agencies characterised by tremendous opacity' and 'non-disclosure'.

This is when Indian start-ups also withdrew deposits worth USD 200 million from SVB and parked it in the GIFT City. As per Rajeev Chandrasekhar, Indian Minister of State for Electronics and Information Technology, GIFT City provides Indian startups with a low-risk haven for their capital deposits.

GIFT City has developed into a state-of-the-art global financial infrastructure matching with Hong Kong, London and Singapore centres. The financial infrastructure was further enhanced in 2016 with the addition of the NSE International Financial Services Centre (IFSC), which allows investments in stocks listed on the US exchange. To diversify the economic activities of the GIFT City, aircraft leasing firms were registered in 2021 and to further the process, talks to consider aircraft leasing as a financial service are in full momentum.

GIFT City is becoming a favoured destination for banks, financial advisory houses, insurance-related businesses and other forms of financial service-related businesses.

The Union Budget of 2022-23 also earmarked the budget for providing services for global capital to promote 'green' finance, International Arbitration Centre, and international universities specializing in financial management, fintech and STEM fields. With the establishment of the India International Bullion Exchange (IIBX), India also aims to extirpate the market inefficiencies and standardise the gold prices, strengthening India's bullion market.

GIFT City is a visionary city that intends to create a longevity hub for the elderly population as India expects to have more proportion of the elderly population in the next two decades. In addition, GIFT City is developing as a world-class city with dual use. Not only as the financial centre, but GIFT City will also provide space for real estate which will provide it with a smart city akin to well-planned residential areas. The city plans to comprise 22 per cent of residential (14 million sq. ft) and 11 per cent (6 million sq. ft) of social space.

It has the features of well-developed smart cities, including wastewater recycling plants and automated waste collection systems, optical fibre communication rings and city-level cooling systems, among others.

It has a high-technology environment-friendly infrastructure, efficient public transportation, the concept of "walk to work", and the required amenities for a highly equipped urban landscape with social infrastructure including international schools, hospitals, and sports facilities. In addition, the City intends to boost the education ecosystem by attracting foreign universities. Deakin University and the University of Wollongong, Australia, will have their campus in GIFT City. The latter intends to begin teaching on the GIFT City campus the next year.

With a resilient banking system, emerging bullion market, world-class education facilities, well-equipped public infrastructure, and concerns for environment and sustainability at the forefront, the GIFT City stands to be an exemplary of world-class Indian smart cities. It will provide quality living and highly competitive financial infrastructure, inspiring other parts of India like the Kochi-Bengaluru industry corridor.

With its resilient and promising institutions, GIFT City stands to emerge as the Indian version of the global financial market in the near future.

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