The Era of International Businesses in GIFT City – An Exploration

Last Updated on: 16th September 2024, 02:55 pm

The Rise of GIFT City: An International Financial Hub in the Making

Nestled between Ahmedabad and Gandhinagar, Gujarat, lies a city with a global ambition – GIFT City, or the Gujarat International Finance Tec-City. Envisioned by Prime Minister Narendra Modi to rival established financial giants, GIFT City is rapidly evolving into a key player in the international financial landscape. While still under development, it has already made significant strides in attracting international businesses and establishing itself as a prominent International Financial Services Centre (IFSC).

 

The Allure of an International Financial Services Centre

An International Financial Services Centre (IFSC) is a game-changer for international businesses. It provides a unique zone within a country that operates with global regulations and offers attractive tax benefits. This makes them ideal locations for companies seeking to expand their reach and tap into new markets. Setting up a base in an IFSC like GIFT City allows businesses to enjoy:

• A Streamlined Approach: The IFSC boasts a simplified regulatory framework overseen by a single authority, eliminating the complexities of dealing with multiple regulatory bodies.
• Enhanced Cost Efficiency: GIFT City offers a competitive tax regime, translating to significant cost savings for international businesses.
• Global Connectivity: Companies in GIFT City have access to international exchanges and products, allowing them to participate in global financial activities seamlessly.

 

The Rise of IFSCA: A Catalyst for Progress

The establishment of the International Financial Services Centre Authority (IFSCA) in 2020 marked a turning point for GIFT City. The IFSCA acts as a single regulator, streamlining the process of setting up and operating a business within the IFSC. Its proactive approach, with regular updates and amendments to regulations, fosters a business-friendly environment that is conducive to international investment.

This focus on ease of doing business has paid off. A significant milestone was achieved in 2023 when derivatives trade worth $7.5 billion shifted from Singapore to the NSE International Exchange (NSE IFSC) located in GIFT City. This not only underscores the growing trust in GIFT City as a financial hub but also positions it as a viable alternative for international financial transactions.

 

Unveiling the Advantages of Setting Up Business in GIFT City

GIFT City, India’s ambitious IFSC, is rapidly evolving into a magnet for businesses seeking a global foothold. But what exactly makes GIFT City so attractive? Here’s a breakdown of the key benefits that international businesses can enjoy:

Streamlined Regulations and Supportive Environment:

• The International Financial Services Centre Authority (IFSCA) acts as a single regulator for GIFT City, eliminating the complexities of navigating multiple regulatory bodies. This simplifies the process of setting up and operating a business, saving time and resources.
• IFSCA is proactive in introducing regular updates and amendments to regulations, demonstrating a commitment to creating a business-friendly environment. Their focus is on streamlining procedures and removing bureaucratic hurdles.

Cost-Effectiveness: A Competitive Tax Advantage

• Compared to other established financial centers, GIFT City offers a significantly more cost-effective environment.
• Businesses benefit from a 10-year tax holiday for new units, a major incentive for establishing a base in GIFT City.
• There are exemptions from various taxes, including Goods and Services Tax (GST) on services received by a unit, Securities Transaction Tax (STT), and stamp duty for transactions done on international exchanges within the IFSC.
• The Minimum Alternate Tax (MAT) rate for income earned in convertible foreign currency is just 9%, compared to the usual 15%. These tax benefits translate to substantial cost savings for international businesses.

Addressing Operational Hurdles: Government Initiatives

The Indian government is actively working to address any challenges faced by businesses operating in GIFT City:

• Previously, obtaining approvals required navigating two separate entities – the development commissioner of the special economic zone and the IFSC authority. To address this, the government has granted the IFSC Authority powers under the SEZ Act, simplifying the approval process.
• A single window IT portal is also proposed to be established to streamline the process of obtaining approvals for businesses setting up in GIFT City.

These initiatives demonstrate the government’s commitment to creating a seamless and efficient operating environment for international businesses in GIFT City.

 

A Flourishing Ecosystem: GIFT City Beyond Traditional Finance

GIFT City’s ambitions extend far beyond becoming just another center for established financial institutions. While traditional players like banks and asset managers are crucial to its development, a new wave of businesses is propelling GIFT City towards becoming a comprehensive financial and technological ecosystem.

Financial Powerhouses Take Root

• International Banks: 28 IFSC Banking Units (IBUs) are already operational in GIFT City. These branches of international banks offer a wide range of services, including trade finance, investments, commercial loans, and interbank placements. Their presence in GIFT City facilitates seamless international financial transactions.
• Asset Managers and Alternative Investment Funds: Recognizing the potential of GIFT City, asset managers and alternative investment funds are setting up shop. This allows them to cater to both inbound and outbound investments. Global investors gain access to Indian markets, while domestic investors can explore opportunities abroad through the liberalized remittance scheme.

Beyond Finance: A Diversifying Ecosystem

GIFT City is not limited to traditional financial institutions. It’s actively attracting new types of businesses to create a well-rounded ecosystem:

• Aircraft and Ship Leasing Companies: These companies are finding GIFT City’s tax benefits and streamlined regulations particularly attractive. For instance, Air India’s recent acquisition of Airbus A350 aircraft was financed by a company registered in GIFT City, highlighting its growing role in the aviation sector.
• Fintech Startups: GIFT City is proving to be a fertile ground for innovative fintech startups. The supportive regulatory environment and access to a global talent pool are incentives for these companies to establish their base here.

Tech Giants Take Notice

The potential of GIFT City hasn’t gone unnoticed by leading technology companies. Global tech giants like Google and Oracle have already acquired space to set up fintech centers. This signifies a growing synergy between finance and technology within GIFT City, paving the way for groundbreaking advancements in financial services.

This flourishing ecosystem positions GIFT City as a future-oriented financial hub, well-equipped to compete on the global stage. In the next section, we’ll explore how GIFT City’s infrastructure and focus on talent development are further solidifying its position as a premier business destination.

 

Building a World-Class Infrastructure: More Than Just Brick and Mortar

GIFT City’s vision extends beyond creating a financial powerhouse. To attract and retain top talent, it’s actively building a robust social infrastructure that fosters a desirable living environment. Here’s a glimpse into these efforts:

• Cultivating a Livable City: Recognizing the importance of a well-rounded lifestyle, GIFT City is prioritizing the development of residential units. This ensures a critical mass of residents, creating a vibrant community.
  

   

  
  
• Metro Connectivity: A functional metro rail link between Ahmedabad and GIFT City is expected to be operational by July. This will significantly reduce commute times and enhance accessibility.
  

   

  
  
• Sabarmati Riverfront Development: Plans are underway to revitalize the Sabarmati riverfront, creating a scenic and recreational space for residents and visitors. This will add to the overall quality of life in GIFT City.
  

   

  
  

Investing in the Future Workforce: Deakin University Sets Up Shop

GIFT City is not just about attracting established businesses; it’s also fostering the next generation of talent. The recent opening of Deakin University’s first overseas campus in GIFT City signifies a major leap forward.

• Focus on Job-Oriented Programs: Deakin University offers postgraduate programs in cyber security and business analytics. These programs are specifically chosen to align with the current and future needs of the financial and technological sectors within GIFT City. This ensures a skilled workforce readily available for the businesses operating there.

Real Estate Boom: A Rising Tide Lifts All Boats

The burgeoning activity in GIFT City is having a positive ripple effect on the real estate market:

• Increased Demand: As more businesses establish themselves in GIFT City, the demand for residential and commercial space is on the rise. This has led to a significant increase in property values.
  

   

  
  
• Ahmedabad-Gandhinagar Corridor Benefits: The development of GIFT City is not happening in isolation. The Ahmedabad-Gandhinagar corridor, which flanks GIFT City, is also witnessing a boom in the real estate sector. This benefits not just GIFT City but the entire region.
  

   

  
  

By investing in social infrastructure, education, and fostering a thriving real estate market, GIFT City is strategically positioning itself as a world-class destination, not just for businesses, but also for the people who power them.

 

The Road Ahead: GIFT City’s Ascent to Global Prominence

GIFT City’s journey towards becoming a global financial hub is well underway. The Indian government remains steadfast in its commitment to removing obstacles and fostering a welcoming environment for international businesses.

• Streamlining Regulations and Approvals: Recognizing the need for swift action, the government has taken proactive measures. The recent streamlining of approvals by granting the IFSCA complete authority under the SEZ Act eliminates bureaucratic hurdles. This “single window” approach expedites the process for businesses looking to establish a presence in GIFT City.
• Tax Advantages Remain in Place: The government’s commitment to GIFT City’s success is evident in the continuation of attractive tax benefits. Entities operating within GIFT City enjoy a 10-year tax holiday, along with exemptions from various taxes and duties. These measures significantly reduce operational costs, enhancing the city’s competitiveness.
• Focus on Talent Acquisition: The establishment of Deakin University’s campus signifies a crucial step towards building a skilled workforce. By offering job-oriented programs aligned with industry needs, GIFT City is ensuring a steady pipeline of qualified professionals to meet the demands of its growing financial and technological ecosystem.

In conclusion, GIFT City’s potential to become a prominent player on the global financial stage is undeniable. Backed by a supportive government, a robust infrastructure, and a focus on talent development, GIFT City is poised to attract leading international businesses, establish itself as a financial powerhouse, and contribute significantly to India’s economic growth. The world is watching GIFT City’s evolution, and its future as a global financial hub appears bright.