THE joke for years was that Gandhinagar’s GIFT city is a place without any gifts! To give its full name- Gujarat International Finance Tec-City (GIFT City) was actually off the blueprint charts and announced as Gujarat’s answer to the Fintech powerhouses in Singapore and Dubai way back in 2008. Narendra Modi was at that point still Chief Minister crafting his famous Gujarat Model and Fintech was still not part of the in-vogue lingo of the business community.
But for a decade-plus, since it was first announced with much fanfare it was actually a city without any gift—way ahead of its times and paradoxically way behind the times. The country’s first IFSC (International Financial Services Centre) institution came up only in 2015-16–a good decade after GIFT City was announced. In bits and pieces, the government has incentivised GIFT City, including a 100 per cent tax holiday for businesses for a decade.
What the IFSC does is provide the legal cover of a foreign jurisdiction where companies and institutions can avail of tax exemptions and provide the seamless transactional advantage of financial products and services across borders. Multiple regulatory changes have been affected by Finance Minister Nirmala Sitharaman and slowly but surely there is some traction at GIFT. But we are still a long off away from Singapore or Dubai.
Just take a look at the numbers. Hong Kong and Singapore were founded in 1993 and Dubai in 2004. Hong Kong has over $3.5 trillion in assets; Singapore has 690 listed companies and $2.25 trillion in g assets, and the IFC in Dubai has assets of close to $200 billion with 3,750 active companies and a workforce of 35,000. In contrast, GIFT City’s IFSC has banking assets of around $45 billion and investments total about $1.5 billion (₹11,000 crore) as of the financial year 2022
Now for those of you who are looking at GIFT City as a city per se, it is an enclave of 14 tall skyscrapers in a section of Gandhinagar that is still under development. It is essentially like the city in London, a business district, that can be split into two– Gift City and Gift IFSC. One-fourth of Gift City (a total of 100 acres) is IFSC. The balance is to be full of commercial offices, residential apartments, and the works-schools, hospitals, entertainment and hotels.
One of the issues that continue to slow down GIFT City is that most entities have chosen to retain a majority of their staff and operations either in Mumbai or Delhi depending on where they are headquartered while registering with IFSC and setting up units with a minuscule staff at Gandhinagar. Take the NSE for example, a majority of their staffers still operate from BKC with a skeleton presence in Gandhinagar.
An umbrella regulator
What has now finally set the ball rolling and GIFT City as a true Indian version of the Singapore model is the IFSC Authority, an umbrella regulator for all global financial services that was set up in 2020. Headed by former Company Affairs Secretary Injeti Rao, the Authority has managed to infuse both energy and direction into GIFT City.
This development along with the recent Air India transaction where it completed the purchase of its first A350 aircraft through GIFT City will see more airlines using this offshore entity in India for their acquisition needs. The aircraft has been leased on a finance lease basis which means that Air India will have an option to purchase the aircraft at the end of the lease period. The transaction for Air India was facilitated by AI Fleet Services Limited (AIFS), a wholly-owned subsidiary of Air India, and a GIFT IFSC-registered finance company.
“IFSCA has been working with the stakeholders to develop regulatory enablers for aircraft leasing and financing. The steps taken by Air India by establishing a finance company for the purpose of aircraft leasing and financing at IFSC will go a long way in developing IFSC as a preferred destination for aircraft leasing and financing in India as well as globally,” said Dipesh Shah, executive director, IFSCA (International Financial Services Centres Authority), told the media.
IndiGo, earlier in September, announced its plans to set up a unit in GIFT City with an investment of ₹30 crore. It is expected that Indigo will soon be announcing a transaction through GIFT City that is underwritten by the Bank of China.
After years of trying, leasing has finally taken off from GIFT City. It could well be the start of FinTech taking off in Gandhinagar. But there are many building blocks yet to be put in place.