GIFT Wrapped for the World: Gujarat’s Financial Marvel

By Nikita Parmar

1/18/20265 min read

“The vision for GIFT City is to create a World Class Finance and IT Zone for India to provide services not only to India but to the entire World.”

-Prime Minister Narendra Modi

“GIFT City is India’s bold platform to bring global capital closer home and channel India’s capital to global markets.”

-Pratik Shah, Partner and National Leader – Financial Services, EY India

Gujarat International Finance Tec-City or GIFT City, often referred to as the ‘smart city of the future’, is located in Gujarat, nestled between Ahmedabad and Gandhinagar, offering seamless connectivity. This tri-city ecosystem is a ground-breaking development. It aims to foster an environment supporting business, industry, international finance, and foreign investment, symbolising both a nostalgic era and a promising future.

The GIFTed Vision behind India’s Global Financial Future

GIFT City is committed to becoming a leading global financial and technology hub, with a focus on implementing reforms to establish a financial ecosystem that fosters business growth. As a project of national importance, GIFT City has become an integral part of India's growth story as the country pursues its goal of becoming a developed nation.

Source: Pwc:Moving the needle on Gujarat’s GIFT City

Journey Of GIFT City

Even though GIFT City was incepted in 2007 it saw uncertainties until 2014. Approval as India's first operational IFSC in 2015 marked a turning point, positioning it as a key driver for India's economic growth. After the establishment of the International Financial Services Centres Authority (IFSCA) in 2020 key businesses in GIFT City have experienced significant growth each year. Gift City also gained a lot of recognition post the 2023 Silicon Valley crash, mainly due to its minimal interference from government authorities with respect to business operations and regulatory framework. Additionally, GIFT City was ranked 43rd globally and was recognized as the only Indian financial center in the top 15 of the Asia-Pacific region by the Global Financial Centres Index (GFCI) 38.

Source: The Global Financial Centres Index 38 Report

What sets GIFT City Apart?

The following are the fundamental pillars that set Gift City apart from conventional financial hubs

International Financial Services Centre (IFSC): The IFSC, India’s first, is governed by a unified regulator named IFSC Authority (“IFSCA”) which encompasses regulatory powers of four financial services regulators in India namely Reserve Bank of India (“RBI”), Securities Exchange Board of India (“SEBI”), Insurance Regulatory Development Authority of India (“IRDAI”), Pension Fund Regulatory & Development Authority of India (“PFRDAI”) enabling it to provide single window clearance for all necessary approvals under one umbrella in an easy manner.
Hence, it allows financial institutions to operate under a globally benchmarked regulatory and tax framework, streamlining operations and making India a more attractive destination for foreign investments.
Business-Friendly Environment: GIFT City offers many benefits to attract businesses, including simplified procedures, fast-track clearances,as well as tax incentives making it financially attractive for domestic and international companies. It has become a magnet for global financial services firms and has led to a significant inflow of foreign direct investment.
Smart City Infrastructure: GIFT City is a model for sustainable urban development. State-of-the-art infrastructure, including uninterrupted power supply, high-speed connectivity, and a sophisticated waste management system, ensures a smooth and efficient business environment. The city prioritizes a walk-to-work culture, with residential areas, social facilities, and entertainment options close to office spaces, fostering a healthy work-life balance for residents.
GIFT City Special Economic Zone(“SEZ”): The SEZ was established to encourage exports and foreign investment, especially for multinational corporations, since it offers benefits to the businesses operating in this zone, including duty-free imports and exports, easy regulatory processes, tax benefits on both direct and indirect taxes. For instance the 10-year tax holiday where IFSC units are granted the flexibility to choose any 10 consecutive years within a 15-year window to avail income-tax exemption as well as no GST being applicable on services provided by IFSC units to offshore clients/other IFSC or SEZ units, as they are considered as zero-rated supplies.
Focus on Sustainability: GIFT City is strongly committed to environmental responsibility. The city utilizes green building technologies, promotes energy efficiency, prioritizes using renewable energy sources and is devoted towards the redefinement of green finance as well. It features India’s first district cooling system for energy-efficient climate control. The city also fosters electric mobility, with plans to increase its electric bus fleet, thus improving its residents as well as its workforce’s quality of life.

The Tough Climb to Global Competitiveness

The IFSCA has embarked on a transformative journey to elevate GIFT City into a distinguished "climate finance hub," marking a significant shift in its strategic focus. Initially, the primary objective was to encourage companies that had departed Indian shores to return. Now, the narrative has evolved to encompass a vision of India in 2047, with sustainable finance emerging as a pivotal agenda.

IFSCA has taken a proactive step by establishing a dedicated committee tasked with reshaping the IFSC into a premier climate finance hub.The mission extends beyond short-term objectives, aiming for a sustainable financial landscape that can drive impactful change. By nurturing an ecosystem that promotes climate finance, GIFT City can potentially attract further investments, foster innovation in green finance, and contribute to addressing pressing environmental challenges.

As countries around the world embrace Environmental, Social, and Governance (ESG) criteria, ESG funds are a great source to pool money from international investors into sustainable projects in India via GIFT city which will assist in the furtherance of the nation’s climate goal. The transition towards climate-conscious financial practices aligns not only with global sustainability imperatives but also supports India's long-term developmental goals.

GIFT City as a Climate Finance Hub

Despite remarkable progress, GIFT City still has to tackle a few challenges in order to receive the recognition it deserves as a global financial hub. Firstly, attracting and keeping top talent will be tough since cities like Mumbai, Singapore, and Dubai benefit from greater global recognition, expansive financial markets and extensive client networks. Hence, building a future-ready talent pool will be essential.

Secondly, working on hassle-free and convenient business set-ups as companies are now moving to capture new value pools that are emerging around fundamental human and business needs. A requirement for a mature ecosystem arises, which will equip businesses in GIFT City with the essential tools and resources they need to collaborate across industries and capture value in motion. There is also a need to build infrastructure like schools, hospitals, as well as entertainment for the growing population. Improving connectivity with other cities and within the city itself is crucial too.