Ajay Pandey, MD & Group CEO of GIFT, seems far more relaxed now than he did a year ago. Not without reason. The basic infrastructure of the GIFT City in Gujarat is in place and the first phase of development is drawing to a close. However, he tempers expectations by saying that cities are not built in 1-2 years but take many years to build.

Can you talk about the road travelled over the last 12-18 months in building the GIFT City ?

All the key infrastructure elements of the City, what I call the hardware part of it, was fully operationalised in the last 18 months and is serving all those working in the City. The four key ones are the automatic waste collection system, the underground utility tunnel, water treatment plant, and the district cooling system. The 40-lane kilometers of road with smart lights and all that is already built. There are also dual sources of supply of power, and a telecom fibre ring around the city.

On the software side, we have moved up from citizen strength of 300-400 people to about 7,000 people now. By the end of this fiscal year, we should have 10,000 people working here. Our school, 6-7 eating joints, etc., are operational. In short, infrastructure is here, people are beginning to work here, the city is starting to grow.

Do you think that the enablers for the IFSC are also in place?

The International Financial Services Centre (IFSC) is driven by three key enablers. One is competitive tax regime. We were able to get some tax concessions in the 2016 Budget.

The second is the fact that there is a relaxation of 50-plus clauses of the Company’s Act which helps enhance the ease of doing business for companies that operate in the GIFT IFSC.

The third enabler that we are very proud of is the dispute resolution system. We were able to prevail upon Singapore International Arbitration Centre to come to GIFT. We chose them and they chose us and recently we got approval from the Reserve Bank of India for them to operate here.

With these three enablers, the ball is now rolling. The first vertical to take off is banking. We saw RBI granting licences to 10 banks to open branches here and nine of them are operational and they have crossed around $3.5 billion plus in terms of value of transactions till date.

The second vertical where we are seeing pace is the insurance vertical where we have two of India’s largest insurance companies already here, 5 or 6 are granted licence by IRDAI and some of the re-insurance companies are also likely to come in.

The third visible growth was in the capital market side where India’s first international exchange was inaugurated on January 9 and in June we had the NSE opening its international exchange here. So, net-net, we have more than 100 companies registered or operational in the IFSC in this short span of time.

It’s a good story that is evolving, one that is backed by tangible results on the ground, both in infrastructure and regulatory-driven businesses.

With the tax concessions given to the companies operating in GIFT, how do they compare with the operational costs of businesses in other IFCs such as London or Dubai?

You should look at it from two different angles. Our maximum taxation on the Special Economic Zones for IFSC unit is 9 per cent minimum alternate tax with 10-year tax holiday. This is the only region in the country where tax rates are this low. In Singapore, the maximum taxation is about 10 per cent.

Transaction cost to trade on the GIFT IFSC is about one-fourth of what is paid to transact on any international exchange. There are two reasons for this. This are upcoming exchanges, so naturally they have to promote themselves and they will start at competitive costs. They (London, Dubai etc ) are mature markets and have far greater liquidity. It’s therefore not difficult for them to attract investors.

So going ahead, trading costs could increase?

It’s a volume and liquidity-driven business and increase in transaction cost is possible. But Indian exchanges are already operating at very low cost; the IT cost and membership cost is quite low in India compared with other exchanges. The cost of operating in GIFT IFSC is also quite low. For instance, if you see the rental in Dubai IFSC, it could be ₹700 per sq ft, here the rental could be ₹50 per sq ft. That difference is already there in cost of operation.

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