It would be great hear your insights on the current and future developments of Gift City. It’s an optimistic time for the Indian economy, though much work remains to capitalise on opportunities. Could you comment?
I would say this is a very important time for India. In recent years, India has demonstrated how an economy can be effectively managed. Despite global challenges – with Covid, geopolitical tensions, and tariffs – India has stood out as a bright spot.
This stability is the result of reforms dating back to 1991, which unlocked private participation in the economy. In the last decade, deeper structural reforms like the Goods and Services Tax, Insolvency and Bankruptcy Code, capital market reforms, bank consolidation, and financial inclusion initiatives have delivered measurable benefits.
A critical reform has been inflation management. Investors expect their money to grow, not diminish. In 2016, the government introduced the monetary policy framework agreement with the RBI, clarifying that the RBI manages inflation while the government manages growth. This clarity has stabilised inflation. Supply-side measures, such as improving food grain production and managing oil supplies, have further contributed to economic stability.
Today, India enjoys both macroeconomic and political stability – factors crucial for large, long-term investments. Policy certainty has improved, reflected in India consistently tracking below global levels in the global policy uncertainty index. Combined with national missions in advanced manufacturing, infrastructure, R&D, deep tech, and shipbuilding, this creates immense opportunities for investors. The asset management industry has a key role in this growth.
India’s assets under custody are about $4 trillion, with foreign flows accounting for nearly a third of that. How do you see Gift IFSC contributing to growth and strengthening India’s position as a global financial intermediary?
The government of India’s initiatives under the Viksit Bharata 2047 mission focus on long-term capacity building, top-end manufacturing, and deep sectors like semiconductors, space, defence, telecom, and electronics.
Policies such as production-linked incentive schemes, the national infrastructure pipeline, and the national monetisation pipeline encourage private participation and large-scale investment.
Institutional investors, sovereign wealth funds, and pension funds from Canada, Australia, and the Middle East have turned to India for major investments. India’s domestic savings and investment rates hover around 30%, but to sustain 8%+ growth over 20-25 years, the investment rate needs to rise to 35%, implying foreign capital must fill the gap.
IFSCA was conceived to attract such foreign capital, aligning regulations with global standards to instil confidence. Established in 2019 through an act of Parliament, the IFSC was delegated powers under 16 financial sector laws. Over five years, regulations were drafted benchmarking Singapore, London, Hong Kong and Dubai.
The results are encouraging. Approximately 197 fund managers operate at Gift City, managing over 320 funds – including venture capital, private equity, and private debt. Operational funds have raised commitments nearing $26 billion, demonstrating trust from global LPs, who require high policy, regulatory, and tax certainty. The IFSC remains vigilant, evolving with global markets and exploring areas like tokenisation.
What steps support the evolution of trading across equities, debt, and derivatives at Gift City, and can it become a centre for price discovery?
Gift City IFSC licenses two exchanges: NSE International and India INX, offering trading in stock index futures, including Nifty 50 and Sensex. Nifty 50 has attracted global interest, aided by collaboration with the Singapore Exchange. Daily open interest ranges from $13-23 billion, with monthly trading up to $100 billion.
To complement domestic markets, regulations now allow Indian unlisted companies with global ambitions to list internationally and raise foreign capital. Exchanges are also working on ETFs, cross-listing, and global connectivity beyond Singapore. Prop traders from recognised jurisdictions can trade remotely on Nifty 50 and Sensex products, enhancing liquidity.
Gift City also facilitates outbound investments for resident Indians through a global access programme, enabling regulated access to international markets. This is a fast-growing initiative of interest to domestic investors.
Moving to global fund structures, how is the VCC-type framework progressing, and what are the implications for asset managers?
Asset managers face cost pressures globally. The VCC structure, allowing multiple sub-funds under one umbrella, helps reduce operational costs and management fees. Jurisdictions like Singapore, Luxembourg, and Mauritius have implemented successful models.
We’ve drafted a VCC law, currently under discussion with the Ministry of Finance, with Cabinet and Parliamentary approval expected next year. We are also exploring ways to reduce compliance burdens – for example, allowing third-party fund management for funds under $50 million to ease operational costs for smaller managers. Such measures are aimed at supporting the asset management community.
Unified regulation and tax alignment are key strengths of IFSC. Is there a plan to consolidate tax matters within IFSCA?
Taxation remains a sovereign function. IFSCA plays an advocacy role, benchmarking against global centres. Gift IFSC is a greenfield financial centre, unlike mature brownfield centres like Singapore or Hong Kong. Competitive tax policy is critical, and the Government of India has provided carve-outs to enable this.
Efforts are ongoing to simplify tax administration. The revised Income Tax Law consolidates applicable regulations, and a compendium is planned to make tax measures easier for investors and regulated entities. High tax certainty in assessments and administration is a continuous focus.
Category 3 AIFs at Gift are not pass-through vehicles, unlike other global centres. Turning to innovation and fintech: how does Gift IFSC enable developments like blockchain and digital assets?
Blockchain enables atomic settlements, transparency, and other efficiencies, but cybersecurity and regulatory clarity remain concerns. Gift City has created a sandbox for experiments, including tokenisation of real estate fund units. A consultation paper on tokenisation frameworks has been issued, and draft regulations are in progress, potentially requiring amendments to underlying laws.
Our approach is cautious, allowing tokenisation for specific products and entities that inspire confidence, ensuring investor safety and minimising risks.
Lastly, Custodian banking is critical to global fund servicing. How is the custodian banking framework evolving at Gift IFSC?
Many entities have requested custodial services, recognising their importance for asset management. Our banking team is drafting regulations and will consult the market in the coming months to formalise the framework.