Sep 12, 2024
GIFT CITY an IFSC
GIFT CITY an IFSC
1. What is an International Financial Services Centre (IFSC) and how does it work?
An International Financial Services Centre (IFSC) is a designated area that provides financial services to customers outside the domestic economy. IFSCs handle cross-border transactions, such as fund-raising, asset management, and insurance. For example, GIFT City in Gujarat, India, is an IFSC that offers services like wealth management and risk management to global clients.
2. What is GIFT City, and how has it performed so far?
Gujarat International Finance Tec-City (GIFT City) is India’s first operational IFSC, designed to attract global financial services companies. Since its inception, GIFT City has licensed over 360 units, generating more than 16,000 jobs. It has seen an average daily turnover of over $20 billion on its international exchanges, indicating its growing significance.
3. What general regulatory relaxations does GIFT City enjoy?
GIFT City enjoys several regulatory relaxations designed to make it a more attractive destination for global businesses:
• Reduced Public Float Requirement: Companies listing on GIFT City’s stock exchanges can do so with a lower public float requirement of 10%, compared to the 25% required on domestic exchanges.
• Tax Incentives: Businesses operating within GIFT City benefit from tax exemptions, such as a 100% tax holiday for 10 years on export income for units set up in the SEZ.
• Liberalized Foreign Exchange Rules: GIFT City operates under a more relaxed foreign exchange regime, allowing free movement of capital in and out of the zone, which is essential for international transactions.
• Simplified Regulatory Approvals: Companies in GIFT City face fewer regulatory hurdles and streamlined processes for obtaining necessary approvals, making it easier to operate.
4. What are the benefits of these relaxations for GIFT City?
The regulatory relaxations help position GIFT City as a competitive global financial hub by:
• Attracting More Companies: The reduced public float requirement and other incentives make it easier for companies to list and operate in GIFT City, attracting a wider range of businesses.
• Enhancing Global Competitiveness: With liberalized rules and tax benefits, GIFT City can compete with other international financial centers like Dubai and Singapore, drawing more international investments.
• Boosting Economic Growth: The influx of businesses and investments leads to job creation, increased financial activity, and overall economic growth in the region.
• Encouraging Innovation: The flexible regulatory environment in GIFT City fosters innovation in financial services, enabling companies to develop and offer cutting-edge products and services.
5. How does GIFT City compare to other global IFSCs?
GIFT City competes with other prominent IFSCs like those in Dubai, London, and Singapore. For example, Dubai’s IFSC has grown rapidly, contributing about 6% to the UAE’s GDP. GIFT City is still in its early stages but is poised to become a significant player with the support of these relaxed regulatory norms.
6. What are the implementation challenges for GIFT City?
GIFT City is still developing, and there are challenges in aligning its regulatory framework with global standards. Issues such as coordination among stakeholders and addressing regulatory gaps are crucial for its success. However, the government is expected to address these gaps in the coming years to ensure GIFT City’s growth and competitiveness.
