Budget GIFT

The Gujarat International Finance Tec (GIFT) City has witnessed accelerated growth in recent years, with significant developments in its International Financial Services Centre (IFSC). Recent Budget incentives are expected to further boost its progress, particularly in attracting more companies to set up operations in the IFSC.

Progress of GIFT City (Development in Past Two Years)

• Growth in Financial Services: Over the last two years, the IFSC in GIFT City has gained momentum with the establishment of 31 banks, 80 capital market intermediaries, 37 insurance and reinsurance firms, 55 fintech companies, and over 140 alternative investment funds.
• Sectoral Advancements: Key activities like global bond issuances, aircraft leasing, and insurance, including gold imports through the bullion exchange, have seen significant progress.
• Incentives Driving Expansion: Recent relaxations from Indian regulators, including the Reserve Bank of India and the Securities and Exchange Board of India, have played a crucial role in accelerating the growth of GIFT City.

Budget Incentives for GIFT City (Boost to Ecosystem)

• Tax Deductions Extension: The extension of the sunset date to 2030 for 100% income tax deduction for the first five years and 50% for the next five years will be vital for attracting more businesses to the IFSC.
• Tax Exemptions for Offshore Funds: Transfer of shares or units of offshore alternate investment funds to AIFs in GIFT IFSC will be tax-exempt, helping attract funds from jurisdictions like Mauritius and Singapore.
• Simplified Regulatory Framework: Relaxed rules for fund managers, with extended deadlines for regulatory compliance, will significantly enhance the ease of doing business in the IFSC.

Impact on Global Financial Standing (GIFT City's Growing Influence)

• Rise in Global Rankings: GIFT City has moved up to 52nd position in the Global Financial Centres Index (GFCI) among 121 offshore centers, reflecting its increasing global prominence.
• Surge in Transactions: In 2024, monthly turnover in the IFSC stood at USD 102 billion, and cumulative banking transactions reached USD 975 billion by November, signaling strong financial activity.
• Governance and Regulation: The success of offshore financial centers like GIFT City lies in light-touch regulation and simplified entry and exit processes, which should be promoted to increase domestic investor awareness.

Practice Question

Q. Discuss the role of Gujarat International Finance Tec City (GIFT) and its International Financial Services Centre (IFSC) in enhancing India’s position as a global financial hub. How do the recent Budget incentives contribute to its growth?