India's first International Financial Services Centre (IFSC) at the Gujarat International Financial Tec-City (GIFT City) near Gandhinagar is now well placed to become a reality. The Finance Minister Arun Jaitley on Saturday announced that the Government would bring regulations on IFSC in March, thereby putting Prime Minister Narendra Modi's dream project of GIFT on a fast track.
"..The proposal has languished for years. I am glad to announce that the first phase of GIFT will soon become a reality. Appropriate regulations will be issued in March," the Finance Minister said in his speech.
Modi, during his tenure as the chief minister of Gujarat, had chalked out ambitious plans to make GIFT City with IFSC an international hub for financial services.
"While India produces some of the finest financial minds, including in international finance, they have few avenues in India to exhibit and exploit their strength to the country’s advantage," said Jaitely.
The Finance Minister also maintained that GIFT was envisaged as an International Finance Centre in line with IFCs in Singapore and Dubai, where a large number of Indians work.
Ramakant Jha, MD & Group CEO, GIFT Company Ltd, welcomed the announcement and believed that it would send a positive sign to the investors in GIFT. "We were hoping for this. Now the international community will have a choice in India other than Singapore, Dubai or Malaysia," Jha told BusinessLine .
An estimated Rs. 1,334 crore per day or Rs 2 lakh crore per year, meant for rupee derivatives trading, goes to locations outside India. A substantial part of this trading can be captured by Indian firms if an appropriate regulatory and tax regime exists, Jha informed.
"The taxation need not be comparable to that in Malaysia or Dubai alone, but it has to be better than that. Only then can you can attract the investors to a new area," he said. Notably, Dubai has zero tax, Malaysia has 10 per cent, while Singapore has three per cent tax. In India, SEZ units are burdened with minimum alternate tax (MAT) of around 20 per cent.
The IFSC in GIFT SEZ will house global exchanges and financial institutions. With BSE and NSE planning international exchanges at GIFT, talks are on with the New York Stock Exchange (NYSE), London Stock Exchange (LSE) Singapore Exchange (SGX) and the Dubai International Finance Centre (DIFC).
Experts believe that in the absence of a dedicated financial SEZ, India has lost its share in several financial products, including currency derivatives in commodities, interest rate futures, reinsurance, among others. So an IFSC is likely to tap that opportunity and boost growth for the country.
With a proposed 62 million sq ft of built up area, the entire GIFT City is to be built in three phases. The city will house a smart city having residences, hotels, schools, hospitals, power stations, and fire services, among other civic utilities. In the first phase, already 12.6 million sq ft of area has been allocated for about Rs 9,000 crore.