A mid a relative slowdown in developed markets, the In- dian economy is on a firm footing for establishing itself as a global growth engine, attracting investors with its promising growth story India’s allure as an emerging market has led to a sur- ge in foreign portfolio invest ments (FPI), with more than $10 billion flowing into the equity markets in the last three months alone, while net FPI investments are at $19.09 billion during the cur- rent calendar year. Given the posi- tive sentiments, India’s appeal as an investment destination is evi dent, making it a prime focus for foreign funds seeking significant opportunities in a vibrant and sustainable market ecosystem.
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 contribu- ting to this inflow. Notably, Sing apore emerged as the leading so- urce 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%. Re- markably, Mauritius outperfor- med several developed economi- es 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 Fi nancial Services Centres (IFSCS) that attract offshore fund managers seeking cost-ef fective bases.
OFFSHORE BASE
To foster an offshore location for funds within its borders, India’s forward-looking government es tablished the country’s first IFSC in Gujarat International Finance-Tec (GIFT) City. Nest- led between Ahmedabad and Gandhinagar, GIFT City boasts numerous distinctions, inclu- ding being India’s first functio- nal smart city with cutting-edge infrastructural facilities like District Cooling System (DCS), Automated Waste Collection Sy- stem (AWCS), and Underground Utility Tunnel. The unified regulator provides ease of comp- Tiance and enhanced conveni- ence for global operations. Re- cognised among the top 15 cent- res 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 dy- namic 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 Ci- ty offers enticing incentives to offshore funds and entities ope- rating within its premises. The- se incentives include 100% inco- me tax exemption for 10 out of 15 years, alongside a 9% minimum alternate tax/alternate mini- mum tax on book profits. Addi- tionally, interest income paid to non-residents on money lent to IFSC units is not taxable, ma- king GIFT City significantly at- tractive to investors.
Further, the GIFT City offers no GST on services received by units in IFSC or provided to IFSC/SEZ units and offshore cli- ents, making it a preferred off- shore 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 lea- ding Indian BFSI entities, inclu- ding Aditya Birla Sun Life AMC, Kotak Investment Advisors, Mi- rae Asset Investment Managers (India), Nuvama Asset Manage- ment, and SBI Funds Manage- ment. In addition, the city serves as the investment gateway of choice for large offshore institu- tional investors like ADIA, GIC, GIFT CITY: INDIA’S INNOVATIVE Temasek, and Canadian Pen- sion Funds.
PROMISING PROSPECTS
The enormous potential 9f GIFT IFSC, coupled with unwavering government support, presents bo- undless opportunities. As new funds continue to register with the IFSC, we observe notable develop- ments like easier registration pro- cedures, less stringent regulatory requirements, and a bank account with free movement of foreign currency in US dollars, all encou- raging redomiciling to India.