The Gujarat International Finance Tec-City, or GIFT City, is located on 886 acres between Gandhinagar, the state capital, and Ahmedabad, the largest city in Gujarat.
The land near the Sabarmati River that used to be home to marsh birds and buffalo is being turned into India's newest financial centre.
Only a few glass-fronted towers greet the 20,000 employees of JPMorgan Chase & Co. and HSBC Holdings Plc who come to work each weekday in the state of Gujarat. It is officially called Gujarat International Finance Tec-City, but most people just call it GIFT City. It takes up 886 acres between Gandhinagar, the capital of Gujarat, and Ahmedabad, the biggest city in the state. As of October, bankers here were in charge of a total of $33 billion.
Why do these companies want to be here? A break from many of the rules and taxes that make it hard to do business and trade in the rest of India. GIFT City is an experiment in free markets that is part of a $3 trillion economy that is one of the fastest-growing in the world. For a long time, India has been reluctant to let international investors play with its national currency, the rupee. The goal is to make a place where India-based business that has moved to Dubai, Mauritius, or Singapore can feel welcome and come back home.
At first, Gujarat seems like an odd place to live. Gujarat is the ninth most populous state in India. It is on the west coast, and Mahatma Gandhi was born there. As a sign of respect, the state doesn't sell alcohol, which is often used to make business deals go smoothly. Narendra Modi started planning GIFT City in 2008, when he was still the chief minister of the state. When he became prime minister in 2014, he was able to give the project more policy help and a higher profile. In a July speech to Indian and international bankers, regulators, and business leaders, he said, "The vision of India's future is linked to GIFT City."
Modi's government has given a lot of incentives, like giving businesses that move into the hub's International Financial Services Center, or IFSC, a tax break of 100% for ten years. Changes are being made to the rules to make it easier for Indian companies to rent ships and planes through GIFT City instead of on foreign soil. Foreign universities will eventually be able to open campuses in India without following the rules, and companies can avoid India's notoriously bad ways of enforcing contracts by using an international arbitration centre.
India's currency not being fully convertible is a big problem that the financial centre wants to fix. Changing money into foreign currencies requires a lot of paperwork. Because of this, trading in rupees and financial assets denominated in rupees has moved to centres outside of India that Indian regulators can't keep an eye on. Most of these rules don't apply in GIFT City, though, so key currency derivatives contracts can be traded onshore. This can counteract some of the effects that offshore trades have on the rupee exchange rate.
Another product that used to be traded on the Singapore Stock Exchange has moved to the financial centre. It is a popular derivative that is based on a benchmark gauge of Indian stocks. In 2022, the National Stock Exchange of India opened a cross-border trading link with Singapore, similar to the Hong Kong-Shanghai link. This let global investors trade stock derivatives listed on the Indian market without having to set up shop in India.
Since the Indian government created the IFSC Authority in 2020 to make it easier to get approvals and keep an eye on things in the special economic zone, the number of trades has gone up. In October, the two stock exchanges in the financial centre had an average daily turnover of $14.6 billion, up from $3.4 billion in September. Two years ago, the total amount of derivative transactions by banks went from $22 billion to $466 billion, and the total amount of bank transactions went from $45 billion to $303 billion.
The chairman of the IFSC Authority, Injeti Srinivas, says, "Some of the places where India-centered business grew can see that something is happening, and things may not be the same in the future." "Business is getting closer to IFSC."
Through GIFT City, a new international bullion exchange will let qualified jewellers bring gold directly into India. This is a change from the current rules, which only let some banks and agencies approved by the central bank do this. India, which is the world's second-biggest consumer, will be able to import more things now that restrictions are getting less strict. In GIFT City, there is a business that leases and finances planes to meet the demand for new planes in one of the world's hottest aviation markets. Soon, ship leasing will begin.
JPMorgan and Deutsche Bank AG both began doing business in GIFT City in July. JPMorgan will first offer foreign exchange derivatives to its clients. It wants to use its position as one of the largest suppliers of physical bullion in the country to its advantage. Deutsche Bank wants to work with the growing number of Indian companies that need cross-border banking services like hedging and financing. (In 2018, Bloomberg LP, which owns Bloomberg Markets, signed a deal with GIFT City to help it with capital markets.)
Srinivasan Varadarajan, a managing director in global emerging markets at Deutsche Bank in Mumbai, says, "We think the GIFT City policy is a well-balanced way to internationalise the rupee." "In some ways, it's the same as what we've seen in Asia over the last ten years."
One person who is betting on this growth is Jaxay Shah, who started and runs the real estate company Savvy Infrastructure Pvt. His company built the tower that houses the offices of Bank of America Corp. and the temporary headquarters of the IFSCA. It has now bought two nearby plots to double the amount of land it owns in GIFT City. "When else in my career would I get to work in a smart city with a plan for the economy and no bureaucracy?" Shah says.
GIFT City is the first place in India to have central waste, water, and electricity management as well as district cooling, which is an energy-efficient way to cool buildings. Even though it has nice streets and boulevards, clean sports centres, and new things like a school and a hospital, workers tend to leave in the evenings, taking electric buses to their homes in nearby cities with things like movie theatres and fast-food restaurants.
Younger executives in Mumbai, Delhi, and Gujarat who didn't want to be named because they weren't allowed to say anything said that they are often asked on calls if alcohol will be allowed. Several policymakers and lawmakers told Bloomberg Markets that they think the government will make another exception to the rules to let people with licences buy and drink alcohol. People say that the state government knows it needs to change its teetotaler rules to attract residents and make sure the project works.
And that's the story of GIFT City in a nutshell: it's a place where companies can get away from India's rules and red tape. A plan to bring billions of dollars back to markets on the home continent. A "sandbox" where fintech companies can try out new products that work well with global systems. Maybe even a plan for the future of India.
Comments