nilesh shah: Build an enabling ecosystem to make GIFT a global hub: Nilesh Shah

The development of financial services is not only necessary to finance the growth of other industries but is also a growth center in its own right.

Singapore and Hong Kong have emerged as the centers of financial services in Asia. The creation of the GIFT-IFSC and then the conferring of powers on a unified regulatory body, the International Financial Services Centers Authority (IFSCA), was a major step in the right direction for India’s development as a global financial centre.

In a short time, GIFT-IFSC has emerged as an important global financial center. While the IFSCA has taken many steps to build a vibrant global financial center, several coordinated steps are required across the ecosystem to be a global investment hub.

Let’s focus on the steps needed to make the IFSC a global investment centre.

Take advantage of the local market and motivate investment managers

The majority of FDI/FDI investments exceeding $1 trillion in India are directed from global financial centres. We need to lay the red carpet for global investors to start operations in IFSC.

IFSCA’s recent initiative on regulating fund managers versus funds is a step in the right direction. We need to develop a framework like Singapore’s variable capital firms to provide operational flexibility and cost efficiency to global investors.

We need an unambiguous tax policy and its absence has deterred foreign investment firms from setting up shop in India. Preferential access to overseas investments can be made from the domestic money management market to attract investment managers.

Developing an ecosystem for investment managers

We need to leverage our pool of resources across accountants, fund managers, lawyers, advisors, and fiduciary oversight managers to create a plug-and-play ecosystem. Our KPO industry already serves the global investment management community.

Talent gathering

Financial services require the right talent pool. We need to attract talent from other jurisdictions to emerge as a regional power. Adequate living infrastructure, long-term work permits, competitive tax policies, etc. are required to attract global talent. Given the social and cultural infrastructure in Gandhinagar, it may be worth considering a policy of minimum spending time at the IFSC at the initial stage.

Appropriate involvement of educational institutions will be essential to ensure that talent is available on a regular basis. Existing employees will require an upgrade in their skills and exposure to global best practices. The recent budget announcement to establish foreign universities at IFSC is another step in the right direction.

The future is ready

Fin-techs are disrupting financial services. Quantitative and passive investments disable active investments. ESG has become a benchmark in the investment process. Sustainability is the new buzzword in the financial world. The IFSCA must focus on emerging trends and constraints to be ready for the future. We must attract global financial institutions and investment managers with a suitable ecosystem of sustainability centers, green finance, ESG analytics, etc. We must be able to leverage our strengths in artificial intelligence and machine learning to provide advanced analytics and quantitative solutions to the investing world. Compete with peers on emerging trends will be better than established ones.

rules of law

Despite the repeal of many unnecessary laws, the burden of compliance is onerous with the potential for multiple laws to apply to a single activity.

We must benchmark ourselves with our peers and offer superior rule of law to investment managers. IFSCA has built a regulatory framework through extensive collaboration with industry and benchmarking with global peers. However, after the IFSCA, there is a need to simplify the rules and regulations, in the field of taxation, arbitration, settlement of commercial disputes, etc.

Our aim should be to ensure a regulatory framework where global investors do not mind India as an arbitration center/wish to settle disputes under Indian laws.

Innovation and development of financial markets

Although there are no intellectual property rights over financial innovations, we have been lagging behind in encouraging financial innovation. Our organizational approach is like the legendary opening of batsman Sunil Gavaskar: Don’t take risks, avoid defeat. It’s time to go Virendra Sehwag’s style – take risks and go for the win.

Having a vibrant local market is a prerequisite for emerging as a global financial centre. Our financial market infrastructure and supervision are on par with global markets. Product innovation will help deepen markets.

India had a small opening in the year 2000 to enter the field of IT services. We have taken advantage of this openness to emerge as a dominant player in global IT services. The transition was not instant. It required sustained efforts on the part of IT and government actors.

We need to replicate the success of IT services in financial services. The establishment of a unified regulator in the form of the IFSCA is a step in the right direction to make India a global financial centre. However, it needs sustained support from the government and the local ecosystem to ensure that India provides operational flexibility and cost efficiency to attract global investment management firms from other jurisdictions.

(The author is the managing director of

asset management company

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