Story Of The Week

India’s First IFSC –GIFT City

Finance Minister recently announced GIFT city as India’s first International Financial Services Centre. Mr. Jaitely also unveiled rules and regulations for this global financial hub. These regulations are aimed at creating a vibrant International Financial Services Centre on the lines of those in Dubai and Singapore and check the flight of trading in rupee and Indian securities to such offshore financial hubs.

What is an International Financial Services Centre? [1]

A financial centre is a global city that is home to a large number of internationally significant banksbusinesses, and stock exchanges. An international financial centre, sometimes abbreviated to IFC, is a non-specific term usually used to describe an important participant in international financial market trading, usually having at least one major stock market. Some of the reputed Financial Centres are:

New York City

During much of the second half of the 20th century, the United States and its financial capital, New York City, were the leaders. But over the past few decades, with the rise of a multipolar world with new regional powers and global capitalism, numerous financial centres have challenged the predominance of  Wall Street, particularly from London and also Asia, which some analysts believe will be the focus of new worldwide growth.

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                                                                            Fig. New York Stock Exchange      

 London

London continues to maintain a very high financial profile. However, the City of London, like New York, has faced new competitors, including fast-rising eastern financial centres such as Hong Kong and Shanghai.

  

Hong Kong

In 2010, the Hong Kong Stock Exchange raised nearly $53 billion in initial public offerings (IPO), compared with only $42 billion in the U.S. and $16 billion (£10 billion) in London. One estimate in 2009 was that the Hong Kong stock market was the world’s seventh largest and noted that 70% of the world’s 100 largest banks were based in the city.

DIFC

The Dubai International Financial Centre (DIFC) is a federal financial free zone situated in the Emirate of DubaiUnited Arab Emirates. The DIFC aims to provide a platform for business and financial institutions to reach into and out of the emerging markets of the region.

GIFT City

Gujarat International Finance Tec-City or GIFT is a central business district in the Indian state of Gujarat which is being built on 886 acres (3.59 km2) of land. Its main purpose is to provide high quality physical infrastructure (electricity, water, gas, district cooling, roads, telecoms and broadband), so that finance and tech firms can relocate their operations there from MumbaiBangaloreGurgaon etc. where infrastructure is either inadequate or very expensive.gift-1808-inner1

IFSC regulatory regime allows Indian and foreign stock exchanges to set up separate bourses within IFSC as subsidiaries, while market entities from India and abroad would be allowed to operate there by providing issuance and trading in depository receipts and debt securities of domestic as well as overseas companies.

Importance of IFSC in the Indian Context

  • Even though India produces some of the finest financial minds, including in international finance, they have few avenues in India to fully exhibit and exploit their strength to the country’s advantage.
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  • GIFT City has a potential to generate over 10 lakhjobs by 2022.Gift4
  • Mutual funds and Alternative Investment Funds set up in the IFSC can also invest in the securities listed there.
  • Investors and businessmen will not have to go to global financial services hubs such as Dubai or Singapore anymore.
  • New start-ups go to other countries to raise capital. The new facility at IFSC will allow them to raise money in India.
  • Through the IFSC, NRIs will be allowed to invest in foreign currencies. In addition, they can also raise money in foreign exchange from India through IFSC.
  • Gujarat’s GIFT City expects to tap business worth USD 50 billion annually that India has been losing to global financial hubs like Singapore and Dubai.

References

[1] http://en.wikipedia.org/wiki/Financial_centre

[2] http://giftgujarat.in/

[3] http://en.wikipedia.org/wiki/Gujarat_International_Finance_Tec-City

[4] http://www.difc.ae/

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