With Hong Kong’s ability to function as a global financial centre in doubt after China tightened its grip on the city, India is trying to promote Gujarat International Finance Tech (GIFT) City as an alternative for investors.
The finance ministry and regulators, among others, are working on a five-point agenda to scale up the International Financial Services Centre (IFSC), and bring it on a par with popular jurisdictions such as Hong Kong, Singapore and Dubai, said two people, requesting anonymity, besides a government official.
“IFSC is a focus area and you will see a lot of action in the next six months. Products such as gold bullion is our current focus. A method is being worked out with the revenue secretary to ensure trading at IFSC can happen from anywhere while ensuring we do not become a tax haven," said Tarun Bajaj, secretary, department of economic affairs, on Thursday.
The five major reform areas include the launch of more products at IFSC, extending the liberalized remittance scheme (LRS) for derivatives trading and margin payments, a one-point local dollar clearing mechanism, facilitating retail non-resident Indian participation and doing away with requirements for setting up a broking or trading entity at GIFT, the first person said.
“These action points are derived out of a meeting with the prime minister’s office. Stakeholders made a representation that these were key areas preventing broader participation at GIFT," said the second person.
The first international exchange was set up at GIFT City by BSE Ltd in January 2017. Two months later the NSE IFSC was set up. Average daily traded value has risen to $3 billion. But, over 60% of the trades are still proprietary, or prop, trades. Only two foreign brokerages have so far set up shop at GIFT, including Phillip Capital and Dubai-based Evermore Global.
“Given the geostrategic realignments happening, it is imperative that we develop GIFT City as a preferred offshore zone. It can act as a financial gateway for investments," said V. Balasubramaniam, managing director and chief executive, India INX.
Gopika Gopakumar in Mumbai contributed to the copy