Gujarat – one of India’s wealthiest states – is creating the country’s first international financial services centre, in the hope that it will compete with regional giants such as Dubai and Singapore. With a total GDP of about $250bn, Gujarat witnessed average economic growth of 13.5% a year between 2011 and 2016. In 2016, the state contributed 7.57% to India’s total GDP, making it among the five biggest Indian states in economic terms.
The state has a total population of about 60.4 million, India's ninth largest in demographic terms. Located on the western coast, Gujarat has the country's longest coastline at 1600 kilometres. Its largest cities are Ahmedabad (with a population of 6.35 million), followed by Surat (4.59 million) and Vadodara, which was previously known as Baroda (1.82 million). Gandhinagar, the state capital that directly neighbours Ahmedabad, is a planned ‘green’ city with 292,000 inhabitants.
Gujarat is one of India’s most industrialised states and traditionally has been strong in petrochemicals, textiles, pharmaceuticals, automobiles, and gems and jewellery. Many experts believe it is home to some of the country’s best hospitals – including Sterling Hospitals, Apollo Hospital and SAL Hospital – while it is also a leader in life sciences.
However, Gujarat now has ambitious plans to diversify into financial services and Gujarat International Finance Tec-City (known as Gift City) started operating in April 2015. It is a planned ‘smart city' covering 360 hectares with 5.75 million square metres of built-up area, located close to Gandhinagar.
A special economic zone, Gift City is India’s first international financial services centre (IFSC) and is being developed as a global financial services hub. It is a national and international centre of IT and IT-enabled service companies, finance companies, global trading, insurance, offshore banking and data centres. It is also home to a commodity exchange, India INX.
Gift City is the brainchild of Indian prime minister Narendra Modi, who was chief minister of Gujarat state between 2001 and 2014. “From , India is expected to have one unified regulator [for] IFSC at Gift City, covering the international financial services sector,” says Tapan Ray, managing director and group chief executive officer at Gift City. “This will be a game changer for the Indian IFSC, resulting in many more foreign financial services institutions investing here and starting up operations. Gift City is the only IFSC in the country and within its jurisdiction provides companies with major tax breaks.
“We also expect many Indian financial services companies to start to onshore the business that they carry out offshore to Gift City. The centre will provide a regulatory framework comparable with Singapore, Dubai and London.”
Just the job
The hub is already host to more than 200 financial and technology institutions and in excess of $1.6bn has been invested there. Recently, Standard Chartered became the first global bank to receive in-principle regulatory approval and will soon open an IFSC banking unit at the centre. In the long term, Gift City expects to create about 500,000 direct jobs and an equal number of indirect jobs.
“Gift City provides companies with many tax benefits,” says Aditya Sesh, managing director at Basiz Fund Services, a fund services provider and management consultancy that has offices at the IFSC. “That creates a big incentive to locate there. The concept is well thought out and well developed. It is a green city and has great infrastructure. Gujarat has a well-educated population, people are commercially minded, and it is not hard to recruit staff who know how to structure financial instruments.”
The state is home to some of the country’s most prestigious institutions of higher education. The Indian Institute of Management Ahmedabad is ranked the number one MBA school in the country, while CEPT University and the National Institute of Design, both located in Ahmedabad, are regarded as among the best architecture and design schools in India, respectively.
Gujarat was ranked the fifth best state and union territory in terms of ease of doing business by the World Bank and the national Department of Industrial Policy and Promotion in 2018. The state occupied the top position in the National Council of Applied Economic Research’s State Investment Potential Index in 2016 and 2017.
On top of its academic excellence, Gujarat has some of the best infrastructure in India, hosting 42 ports and 16 airports. It contains 19 operational special economic zones, eight notified special investment regions and 182 industrial estates. The industrial corridor linking Delhi to Mumbai provides further impetus for industrial growth in the state, as about 38% of the corridor lies in Gujarat.
“The state is known as 'the land of the entrepreneur' and it has a large and business-minded diaspora around the world, including in the UK,” says Peter Cook, British deputy high commissioner to Gujarat. “There are three direct flights from Ahmedabad to London every week. The state is very strong in the life sciences field and it is the first place in India that foreign investors in that sector consider. Ahmedabad is also in a strategic location on the Delhi to Mumbai corridor.
“Gujarat is home to a very attractive sea port at Surat. The city has been a centre for the diamond trade for centuries and 90% of the world’s diamonds are cut and polished there.”
A start-up ecosystem
Gujarat also has a thriving tech start-up ecosystem and the state government is providing about 100 start-ups with funding of $20,000 each during their first year. It is home to about 40 start-up incubators, most of which are located in Ahmedabad.
“The start-up ecosystem in Gujarat is underdeveloped but it is starting to get better,” says Yash Saxena, resident entrepreneur at Ignite, an incubator focused on the Internet of Things located in Ahmedabad. “The talent pool is very big in Gujarat. It has some of the best higher education institutions in the country but many graduates go on to work in other parts of India. However, Gujarat is becoming more attractive to start-ups because it costs less to set up a company here. The cost of living is lower here than in other big cities in India.”