💎 Can GIFT City become India's next financial capital?

What is GIFT City?

Gujarat International Finance Tec-City, or GIFT City, is a visionary initiative reshaping India's financial and technological landscape. Nestled in the vibrant state of Gujarat, it's a meticulously planned city that aims to become a global hub for financial and IT services.

GIFT City is India's first operational smart city, equipped with world-class infrastructure and cutting-edge technology. But what truly sets it apart is its status as an International Financial Services Centre (IFSC).

IFSC is now bustling with activity, hosting over 400 entities and providing employment to more than 20,000 individuals. Banks, stock exchanges, and financial services firms establish global operations in this hub.

The city's strategic location, combined with its regulatory environment and state-of-the-art facilities, positions it uniquely to attract domestic and international businesses alike.

Areas of business in GIFT City

GIFT City, spread across 886 acres, is a multi-service Special Economic Zone (SEZ) with India's first notified International Financial Services Centre (IFSC) and an exclusive Domestic Tariff Area (DTA).

GIFT city offers benefits to several areas of businesses that can be demarcated under 2 categories:

1. Financial services - IFSC

At present, the IFSC houses over 180 authorized financial entities. The primary institutions that are allowed to establish a unit in the IFSC span across:

2. Allied services

The allied services hosted in the GIFT City include global in-house centres, aircraft leasing & financing, foreign universities, and ship leasing.

IFSC ecosystem and business growth:

In GIFT City, Hedge Funds constitute 47% of the registered funds, Private Equity funds constitute 47%, and Venture Capital funds comprise 6%.

Over 40 additional funds are in the process of being set up, with some having already secured an SEZ licence.

Among the 60+ funds registered, ten are mutual fund houses, including notable names such as DSP, IIFL, Kotak, Motilal Oswal, Nippon Life, and Aditya Birla.

GIFT City has 23 registered banks, including global giants like Barclays, Deutsche, HSBC, JP Morgan Chase, Standard Chartered, MUFG, NBD, and BNP Paribas.

Furthermore, there are 39 service providers for funds registered with IFSC. These include fund administrators, custodians, trusteeship firms, legal firms, taxation firms, consultants, and other service providers.

Tax incentives at IFSC

Recognised stock exchanges in IFSC

GIFT City is home to 2 recognised stock exchanges.

1. NSE IFSC and
2. India International Exchange (IFSC) Limited (India INX)

These exchanges facilitate trading in various financial instruments, including equities, derivatives, and commodities.

The notional turnover on the recognized stock exchanges within the IFSC rose to USD 2,867 billion in the fiscal year 2021-22, up from USD 1,980 billion in the fiscal year 2020-21. This represents an approximate increase of 45% compared to the previous fiscal year.

GIFT Nifty - A game changer for India's financial landscape

A significant development took place recently - the introduction of GIFT Nifty on July 3, 2023, when $7.5 billion worth of SGX Nifty contracts migrated to GIFT City. This marked a significant shift in India's financial market, bringing trading back to India from the Singapore Stock Exchange (SGX).

Here are some reasons why GIFT Nifty is a game-changer for India

• GIFT Nifty will encompass 4 products—GIFT Nifty 50, GIFT Nifty Bank, GIFT Nifty Financial Services, and GIFT Nifty IT derivative contracts.
• The transformation is expected to significantly boost GIFT City, particularly following the removal of FEMA restrictions by the RBI in 2015.
• The shift of derivative contracts due to the SGX-Nifty partnership is anticipated to increase Indian bourses' revenue in the current financial year.
• The SGX-NIFTY partnership is a 50-50 arrangement, with all open positions in SGX Nifty being transferred to NSE IFSC Nifty as part of a liquidity switch. Trading of futures and options will occur in GIFT City, while SGX will handle clearing.
• GIFT Nifty will operate for 21 hours, from 4 am IST to 2 am IST, the following day, extending the current 16-hour operation of SGX Nifty.
• Post-transition, GIFT Nifty will serve as the early indicator for markets, a role previously held by SGX Nifty.

Just this week, the NSE International Exchange (NSE IX) announced that GIFT Nifty derivatives reached a record single-day trading activity of 2.14 lakh contracts, amounting to a turnover of $8.5 billion in their first session.

What lies ahead for GIFT City?

The future of GIFT City looks promising. Set to undergo a significant expansion, it is projected to acquire land from 4 villages in Gujarat's Gandhinagar district, increasing its size by approximately 2,300 acres. This marks the first significant expansion for GIFT City since it was first conceived in 2007. Upon completion, GIFT City will triple in size, growing from its current 1,065 acres to approximately 3,365 acres.

GIFT City will offer even more opportunities for investors as it continues to grow and evolve. It is set to play a crucial role in shaping India's financial future and its status in the global economic landscape. As we continue exploring India's evolving financial landscape, GIFT City stands as a testament to the country's potential and ambition.