Analysing the FDI Flow
India’s thriving economy has also attracted $46 billion in FDI during FY2023, registering a remarkable growth of 89% since FY2014. This warrants scrutiny of the jurisdictions contributing to this inflow. Notably, Singapore emerged as the leading source of FDI to India, contributing 37% ($17.2 billion) of the basket. The small island nation of Mauritius had a 13.32% share followed by the US at 13.13%. Remarkably, Mauritius outperformed several developed economies in its contribution to India’s FDI. Smaller economies like Singapore and Mauritius played a vital role in bolstering India’s FDI inflows, owing to their world-class International Financial Services Centres (IFSCs) that attract offshore fund managers seeking cost-effective bases.GIFT City: India’s Innovative Offshore Base
To foster an offshore location for funds within its borders, India’s forward-looking government established the country’s first IFSC in Gujarat International Finance-Tec (GIFT) City. Nestled between Ahmedabad and Gandhinagar, GIFT City boasts numerous distinctions, including being India’s first functional smart city with cutting-edge infrastructural facilities like District Cooling System (DCS), Automated Waste Collection System (AWCS), and Underground Utility Tunnel. The unified regulator provides ease of compliance and enhanced convenience for global operations. Recognised among the top 15 centres expected to gain global significance in the next couple of years, GIFT City has become an ideal location for offshore funds seeking entry into a dynamic and vibrant emerging market ecosystem poised for sustainable growth.
Fund Regime and Tax Benefits AT GIFT CITY
With a focus on elevating India’s stature in the global finance and technology landscape, GIFT City offers enticing incentives to offshore funds and entities operating within its premises. These incentives include 100% income tax exemption for 10 out of 15 years, alongside a 9% minimum alternate tax/alternate minimum tax on book profits. Additionally, interest income paid to non-residents on money lent to IFSC units is not taxable, making GIFT City significantly attractive to investors.
Further, the GIFT City offers no GST on services received by units in IFSC or provided to IFSC/SEZ units and offshore clients, making it a preferred offshore location for global funds seeking both cost-effectiveness and dynamism. Moreover, the Special Economic Zone (SEZ) provides various relaxations for fund management entities and Alternative Investment Funds (AIFs), cementing its position as a hub for global enterprises in the new age.
Unprecedented Developments
With a hospitable environment and favourable policies, GIFT City has already become home to multiple funds supported by leading Indian BFSI entities, including Aditya Birla Sun Life AMC, Kotak Investment Advisors, Mirae Asset Investment Managers (India), Nuvama Asset Management, and SBI Funds Management. In addition, the city serves as the investment gateway of choice for large offshore institutional investors like ADIA, GIC, Temasek, and Canadian Pension Funds.
Promising Prospects
The enormous potential of GIFT IFSC, coupled with unwavering government support, presents boundless opportunities. As new funds continue to register with the IFSC, we observe notable developments like easier registration procedures, less stringent regulatory requirements, and a bank account with free movement of foreign currency in US dollars, all encouraging redomiciling to India.
(The author is MD & Group CEO, GIFT City)