GIFT City and the Global Financial Centers Index (GFCI): India’s Journey to Global Financial Prominence

Introduction

India, the world’s fourth-largest economy, has long aspired to become a global financial powerhouse. While its economic growth, technological capabilities, and entrepreneurial ecosystem are world-renowned, its absence among the top global financial centres has been a noticeable gap. This is where Gujarat International Finance Tec-City (GIFT City) comes in — a bold and futuristic project that aims to catapult India into the ranks of the world’s top financial hubs, as assessed by the Global Financial Centres Index (GFCI).

The GFCI, compiled biannually by the Z/Yen Group (UK) and the China Development Institute, ranks the competitiveness of global financial centres. It evaluates cities on their business environment, financial sector development, infrastructure, human capital, and reputation. GIFT City, India’s first and only operational International Financial Services Centre (IFSC), is steadily climbing in this global ranking and gaining international recognition.

Understanding the GFCI: A Global Barometer

The Global Financial Centres Index is more than just a ranking — it is a reflection of a city’s capability to attract international business and investment. It provides a quantitative and qualitative assessment of 120+ financial centres globally.

Key Parameters of GFCI:

  1. Business Environment: Regulatory transparency, tax policies, and ease of doing business.
  2. Human Capital: Availability of skilled workforce and educational infrastructure.
  3. Infrastructure: Transport, real estate, ICT systems, and physical infrastructure.
  4. Financial Sector Development: Depth and diversity of financial services.
  5. Reputation and General Factors: City branding, safety, and quality of life.

A higher GFCI ranking enhances a city’s visibility and ability to attract global banks, asset managers, fintech firms, and institutional investors.

GIFT City: India’s Answer to Singapore and Dubai

Conceived in 2007 and operationalized over the past decade, GIFT City is located near Gandhinagar in Gujarat. It is designed to offer a world-class financial ecosystem with a liberal regulatory environment, zero currency risk (USD-INR transactions allowed), and attractive tax incentives.

Key Features of GIFT City:

  • India’s only IFSC, regulated by the International Financial Services Centres Authority (IFSCA).
  • Full Rupee convertibility within the IFSC zone.
  • 100% income tax exemption for 10 years.
  • No securities transaction tax, commodity transaction tax, or stamp duty.
  • Dual international exchanges: India INX (BSE) and NSE IFSC.
  • Presence of foreign banks, insurance companies, funds, and fintechs.

GIFT City’s Current Standing in the GFCI

As of GFCI 34 (September 2023):

  • GIFT City IFSC was ranked in the 70–80 range globally, showing progress but still far behind top-tier centres like New York, London, and Singapore.
  • Among Asia-Pacific financial centres, GIFT City is still emerging but has outperformed several regional cities in terms of regulatory clarity and infrastructure planning.

Why GIFT City Matters in India’s GFCI Aspirations

1. Bridging the Gap in International Finance

India, despite its economic size, lacked an integrated financial services hub capable of hosting global institutions. GIFT IFSC fills this void by allowing cross-border transactions, offshore fund management, and international capital raising — critical criteria in GFCI evaluations.

2. Unified Regulatory Framework

The formation of IFSCA as a unified regulator is a game-changer. Unlike traditional Indian regulation divided between SEBI, RBI, IRDAI, and PFRDA, IFSCA provides a single-window clearance system, which aligns with global best practices.

3. Encouraging Innovation and Fintech

IFSCA has introduced sandbox regulations, supported fintech incubators, and allowed the trading of digital asset derivatives under controlled environments — helping India appeal to the GFCI’s innovation-focused parameters.

4. Attracting Global Talent and Institutions

Major financial players including HSBC, Standard Chartered, MUFG, and Deutsche Bank have set up operations in GIFT City. India’s growing pool of finance professionals and lower operational costs make it an attractive alternative to high-cost cities like Hong Kong and London.

Recent Developments Propelling GIFT City Up the GFCI Ladder

1. Global Fund Relocation Framework

India introduced regulations in 2021 to allow foreign funds to redomicile in GIFT IFSC. This attracted global Alternative Investment Funds (AIFs), including family offices and hedge funds.

2. Aircraft and Ship Leasing

GIFT City is becoming a hub for aircraft leasing, a domain previously dominated by Ireland and Singapore. This diversification enhances its profile in the GFCI’s financial sector development parameter.

3. India’s Sovereign Green Bonds and Masala Bonds

Indian sovereign entities are increasingly using GIFT City exchanges to list green bonds, masala bonds, and foreign currency bonds, boosting its capital market profile.

4. Unified INR Clearing System

The Reserve Bank of India (RBI) has allowed onshore banks to set up IFSC banking units, helping with INR clearing and reducing currency conversion risks.

Challenges That GIFT City Must Overcome

While GIFT City’s trajectory is promising, several hurdles must be addressed to climb higher in the GFCI:

1. Global Perception and Branding

India lacks the global branding strength of cities like Singapore or Dubai. More international roadshows, MOUs, and policy outreach are essential to improve GIFT City’s reputation score in GFCI.

2. Connectivity and Talent Migration

Despite modern infrastructure, GIFT City’s location lacks the cosmopolitan appeal of Mumbai or Bengaluru. Better air connectivity and international schooling are needed to attract global talent.

3. Currency and Capital Account Liberalisation

India still has partial capital controls, which restrict full foreign investor freedom. Although GIFT City offers offshore features, national policies on currency convertibility continue to weigh down investor confidence.

4. Critical Mass and Ecosystem Depth

GFCI rankings reward centres with deep and interconnected ecosystems. GIFT City needs more fintechs, legal firms, auditors, risk consultancies, and universities to create a self-sustaining financial hub.

Vision 2030: GIFT City Among Top 25 in GFCI?

The Indian government has a clear vision of making GIFT City a global competitor to Singapore, Hong Kong, and Dubai. If reforms continue and ecosystem growth is sustained, India aims to place GIFT City among the top 25 in the GFCI by 2030.

Policy measures to support this include:

  • Allowing Retail Participation via India INX.
  • Promoting Global Bullion Exchange through GIFT IFSC.
  • Providing tax parity for IFSC units versus global competitors.
  • Partnering with foreign universities for finance-related courses on campus.

Conclusion

The Global Financial Centres Index is the international gold standard for assessing financial centre competitiveness. With the creation and scaling of GIFT City, India has taken a strategic leap to assert its place in global finance. While challenges remain, the building blocks — regulatory innovation, tax incentives, and global integration — are in place.

If India sustains its momentum, GIFT City could soon become not just a participant but a frontrunner in global finance. The journey from aspiration to achievement in the GFCI rankings will not just mark the rise of one city but the transformation of India’s role in the international financial order.

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