What are the Challenges Faced by GIFT City?

Introduction

India’s first International Financial Services Center (IFSC), Gujarat International Financial Technology City (GIFT City), was established near Gujarat’s capital, Gandhinagar, in 2015. In recent years, GIFT City IFSC has offered a competitive advantage to offshore investors. Under the new tax rules for IFSC, they are exempt from various taxes, including Goods and Service Tax (GST), dividend distribution tax, and capital tax.

What does GIFT City mean?

GIFT City, also known as Gujarat International Finance Tec-City, is a commercial and residential arena with commercial space to provide global financial services to investors. The commercial spaces are used to develop infrastructure to provide investors with global financial services. Offshore banking, asset management, insurance, capital markets, IT services, and business process outsourcing are some of the business segments that are setting up their units within GIFT City. GIFT City, Gandhinagar also hosts several approved and regulated International Financial Service Centers (IFSCs).

What are the Challenges Faced by GIFT City?

GIFT City has faced challenges in attracting jobs and investment, resulting in a lack of employment opportunities in the city. Below are a few challenges faced by GIFT City, Gandhinagar:

1. Recruitment Challenges: GIFT City, while offering numerous incentives and business benefits to attract domestic and international investors, has faced challenges in the recruitment of jobs and skilled workers, resulting in a lack of job opportunities in GIFT city. The cost and complexity of the investment may increase if the employees are imported from different regions.

2. Regulatory Hurdles: GIFT City faces legal hurdles, including the need for a clear and concise vision, as well as obvious regulations and tax assurances. The legal system in GIFT City can be complex, requiring legal expertise to navigate specific rules and regulations, which can increase investment costs and complexity.

3. Brand Recognition: Another challenge is the need to increase brand recognition, as GIFT City is still planning to position itself as a global financial hub. But to achieve its ambitious goals with financial giants like London, New York, and Singapore, GIFT City must address the need for a clear and concise vision.

4. Infrastructure Development: GIFT City in Gujarat faces major infrastructure challenges, including the need to improve physical infrastructure, attract migrants to nearby areas, and build infrastructure such as resorts, spas, residential buildings, and hospitals. The city is focused on accelerating its infrastructure development, and there are plans for Metro rail connections, all of which are to be completed by 2024. Steps are also being taken to build commercial, residential, and social infrastructure, including setting up a riverfront project along the river Sabarmati on the west bank of GIFT City.

5. Competition and Market Share: New entrants face the challenge of competing with established players, which can affect market share and profitability. This will probably stop new businessmen from entering the environment, which is already dense and filled with ample competition.

What are the measures taken by the government to address these challenges?

The government is taking various measures to address the challenges facing GIFT City, including regulatory hurdles, brand recognition, infrastructure development, and competition for market share and profitability. Some of the measures taken by the government include:

1. Legal Framework Enhancement

The government is working hard to improve the legal framework governing GIFT City. This requires regular review and innovation to ensure that legal provisions are aligned with evolving corporate needs. Attention is paid to clarifying various areas of law, such as contract enforcement, dispute resolution, and compliance requirements.

2. Tax Law Clarity

Recognizing the importance of tax law in attracting and retaining jobs in the GIFT City, the government is working hard to make it more transparent and certain. This includes regular dialogue with tax professionals and industry stakeholders to identify areas for improvement. The goal is to create a transparent, predictable, and supportive tax system that supports business activities within GIFT City.

3. Investor-Friendly Environment

The government is implementing an investor-friendly environment to attract domestic and international investors. This includes streamlining processes, reducing bureaucratic barriers, and creating incentives for businesses. By actively promoting ease of doing business, the government aims to make GIFT City an attractive destination for financial and industrial projects.

4. Metro Rail Connections

Recognizing the importance of efficient transportation, the government plans to introduce GIFT City with rail connectivity to major metros. This initiative aims to provide sustainable and convenient transportation for residents and businesses. The Metro rail project will enhance connectivity within the city and neighboring areas, contributing to growth in all sectors.

5. Global Roadshows and Conferences

The government is organizing global roadshows and events to showcase GIFT City on an international platform. These forums provide a platform for networking with key stakeholders, including investors, financial institutions, and businesses. Government participation in global events helps connect relationships, share GIFT City’s vision, and gain international recognition.

Conclusion

To conclude, in its ongoing journey to become a global financial hub, GIFT City faces multiple challenges, ranging from recruitment hurdles and labor market developments to complex business challenges. As GIFT City, Gandhinagar continues to grow and succeed, it is important to identify and address these challenges head-on. As the city continues to grow, finding innovative solutions to these challenges will help solidify its position as a leading global financial center.

Suggested Read: How is GIFT City Changing Indian Start-Ups?