What’s next for GIFT City: A closer look at India’s emerging financial powerhouse

The International Financial Services Centre (IFSC) at India’s GIFT City is rapidly emerging as a prime destination for investment opportunities.

For Indian investment managers, in particular, it offers a unique platform for global expansion, driven by a favorable regulatory environment, burgeoning investment prospects, and many positive financial growth indicators. However, taking advantage of these opportunities still requires careful navigation of economic uncertainties and competitive pressures.

Promoting a ‘light touch’ environment to encourage innovation

One of the key factors that makes GIFT City attractive is its “light touch” regulatory environment. Regulators made conscious decisions to design a framework that would be both robust and flexible, designing an environment that would make it easy for Indian investment managers to innovate and grow.

Similarly, Indian investment managers in GIFT City have the opportunity to learn from and connect with their peers in some of the world’s leading financial centers. These learnings can be applied to create similar structures in GIFT City, further positioning it as a key player in the global financial ecosystem.

However, navigating this regulatory landscape can still be complex for corporates and banks. While the International Financial Services Centres Authority (IFSCA) has streamlined many processes, it’s important to stay up-to-date with evolving regulations to ensure compliance and avoid potential pitfalls.

Expanding investment options amid economic uncertainty

Traditionally, Indian investment managers have primarily focused on the domestic market, but GIFT City serves as a gateway for both inbound and outbound investments, enabling them to diversify their portfolios and tap into emerging markets across the globe.

Yet, these opportunities still come with their own share of challenges. The global economic environment, particularly interest rates, poses difficulties. High rates over the past few years have made external commercial borrowings (ECBs) less attractive, as corporates compare offshore borrowing costs with domestic rupee-denominated loans. While the expectation of rate cuts could revive interest, this remains uncertain. Geopolitical events can also impact global financial markets, affecting the availability and cost of funding. Corporates and banks operating in GIFT City must be prepared to navigate these risks, which could influence their business strategies.

A bright spot in loan book growth

One key indicator of success for the efforts underway at GIFT City is the growth that banks are seeing there, with loan books growing from almost nothing to about $60 billion USD.

The ability to access dollar borrowings, external commercial borrowings (ECBs), and trade finance under favorable conditions has been a game-changer. The falling currency swap curves have made offshore dollar borrowing more attractive, bringing a new wave of interest to GIFT City.

GIFT City represents a significant opportunity for Indian investment managers, corporates, and banks to expand their horizons and tap into global financial markets. However, it’s important to keep in mind that GIFT City is still in its nascent stages compared to established financial centers. Competition from hubs like Singapore and Dubai requires continuous efforts to enhance GIFT City’s infrastructure, regulatory framework, and service offerings. With continued support from the government and regulatory bodies, GIFT City is poised to become a major player on the international financial stage, driving growth and innovation for years to come.

In September 2019, Bloomberg signed a comprehensive MoU with India’s Prime Minister Narendra Modi at the Bloomberg Global Business Forum Event in New York to support the development of the IFSC at GIFT City. Bloomberg continues to work closely with GIFT City and IFSCA to further ‌ strengthen global investment in India through a special dialogue series with senior members of the IFSCA, exchanges, banks, investment companies and other stakeholders.