In 2007, when Mumbai investment banker Percy Mistry submitted his committee’s report on “Making Mumbai an International Financial Centre” to the then Union finance minister P Chidambaram, the incumbent chief minister in Gujarat was toying with a similar idea about Gandhinagar.

Mistry’s committee comprised the high table of Indian finance: KV Kamath, Nimesh Kampani, Aditya Puri, OP Bhatt, CB Bhave, to name but a few. The committee’s submissions were precise, well-researched and feasible. Mumbai was already the natural fulcrum of the country’s finance, it had the social and cultural infrastructure that could be further developed to create a global investment centre, and the upcoming Bandra-Kurla Complex, like the City of London, would serve as its beating heart.

17 years later, on January 10, the Gujarat International Finance Tec-city in Gandhinagar, will play host to the 10th edition of Vibrant Gujarat and the buzz fuelled by Gujarat ministers is that Elon Musk will be there to announce the setting up of a regional Tesla hub. Likely next to him will be Prime Minister Narendra Modi, for whom GIFT city was once just a gleam in his eye but who has now seen the project through to fruition.

Already, over 500 companies have set up offices in the soaring glass-façade towers of GIFT City including Google, Oracle, Bank of America, Citibank and Eros Investment. The country’s first international bullion exchange is also located here, and this week, billionaire Azim Premji received an in-principle approval to set up a family-investment fund at GIFT City from where he can invest abroad.

But as all eyes turn to Gandhinagar, in Mumbai, there is disenchantment, and for a city famed for her get up-and-go spirit, a certain bitterness. An eminent corporate citizen and banker recalls meeting Percy Mistry five years after the submission of his committee’s report and Mistry telling him, “Not a jot of the report had been implemented. The government of the day has clearly demonstrated that they are not interested.”

“From 2002, when it was considered madness to invest in Gujarat, to the creation of India’s first greenfield Smart City, it is a remarkable turnaround,” says senior Gujarati journalist Ajay Umath about the Gandhinagar project.

The growth

“GIFT has reached an inflection point where the envisioned goals can now be achieved. All we see from here is an upward trajectory with sustained growth,” says Tapan Ray, GIFT City managing director. According to the Global Financial Centres Index 2023, GIFT City is now ranked at number 67.

India’s first International Finance Services Centre (IFSC) which hopes to compete with London, Singapore, Dubai or Hong Kong, still lacks the pulsating energy that marks these global financial hubs. Tall buildings, resembling blocks of development, have emerged from the dust of what was once barren land. They now stand mysteriously shrouded in mist when viewed from the air, only the gleam of Sabarmati apparent from the distance. The present workforce at GIFT is 20,000 but the government aims to take this number to one lakh eventually. Multiple developers from Sobha to Hiranandani to Raheja are making a bee-line to create housing stock in and around GIFT City. There are also ambitious plans to grow the hub from the existing 886-acres to 3,400 acres in the future, says a representative of the Gujarat government which holds 100 per cent equity stake.

At present 250 acres at GIFT City have been earmarked for the IFSC as a multi-services special economic zone (SEZ). This has been legally enabled by the provisions of the Special Economic Zones Act, 2005.

Starting trouble

But to even get here has been far from smooth for GIFT City Co., which was incorporated as a 50:50 joint venture between IL&FS and the state-owned Gujarat Urban Development Corporation (GUDC) in June 2007. Land for the project was handed over to the GIFT City authorities only in 2010, and in the same year, the services of one of the consultants, Delhi-based architectural firm, Fairwood Consultancy, were terminated. Arbitration proceedings over recovering ₹178 crore from Fairwood are still underway.

In October 2018, the central government superseded the IL&FS board with a new board after it ran up a debt ₹91,000 crore and the ministry of corporate affairs sent a damning report to the government in Delhi. In June 2020, IL&FS completed the sale of its 50% equity stake in GIFT City to the Gujarat government for ₹32 crore.

The creation of the International Financial Services Centres Authority as a unified regulator in 2020 marks a pivotal milestone in this journey, says a Gujarat government official. From October 1, 2020, IFSCA assumed the power of four domestic sector regulators, namely RBI, SEBI, IRDAI & Pension Fund Regulatory and Development Authority of India (PFRDAI) in so far as the development and regulation of IFSCs in India were concerned.

In April 2022, IFSCA introduced the framework to oversee fund management activities, and at present, GIFT IFSC has more than 60 alternative investment funds (AIFs) overseeing funds over $24 billion which otherwise may have landed up at international finance centres in Singapore or Mauritius, says an official close to the development.

The challenges

But despite the government push, some believe that GIFT city needs more to compete with international heavyweights. A truly world class financial centre needs an enabling environment; not just in terms of business infrastructure; but a city that lives and breathes, has opportunities to sustain the social lives of the high rollers that will make it their home; a sense of fun and culture. A banker in Mumbai who speaks to HT on the condition that he not be quoted, points out, “A cosmopolitan global city is the fundamental prerequisite for any IFSC to be viable and usable. Is GIFT city any close to becoming that?”

Percy Mistry, whose original report on creating the IFSC in Mumbai gathers dust, agrees with his banker friend. “If someone thinks that GIFT City will be like Wall Street in 2047, that’s not going to happen. It will at best be an outpost of Mumbai. Companies and institutions are being forced to take money and put something there but the real deal-making will continue to be done from Mumbai,” he says, speaking to HT over phone.

Mumbai’s cachet and its power have emanated from money plus her people. The finest corporate lawyers, the media, some of the country’s best accountants are here. “Are they going to keep commuting to Gandhinagar?” asks the banker. “Some of the best schools in the country are in Mumbai, as are restaurants and cultural centres. This is the bulwark that attracts the finest global talent to any international financial hub.”

But it is not as if Gujarat is unmindful of these needs. GIFT City has allocated over 22 million square feet for offices, residences, schools, hospitals, hotels, hypermarkets and more. The Sabarmati riverfront project in Ahmedabad will be extended up to GIFT City over the next three years. Metro connectivity from Ahmedabad to Gandhinagar too is on track to become operational by mid-2024 and work is afoot to create a crafts hub on the lines of Dilli Haat. Two Australian universities, Wollongong and Deakin have been given permission to set up their international campus here. And last week, the Gujarat government permitted alcohol consumption within GIFT City for owners, employees, and official guests of businesses. Gujarat is otherwise a dry state. “The relaxation was done with the aim of providing a global ecosystem,” said a state government official. “A fool can now be a drunken fool,” is Mistry’s riposte even as he goes on to lament how Mumbai does not have a powerful leader fighting in its corner and hence the city is losing out.

Jaxay Shah, CMD of Savvy Group, a real estate firm with significant presence in GIFT City, describes the lifting of the prohibition as a bold and historic move. “There has been prohibition in place from the time Gujarat separated from Bombay State in 1960. While Maharashtra always allowed for alcohol, justice is finally being done in Gujarat and GIFT City is now ready to compete with Dubai, Singapore and other international hubs.”

“The relaxation in laws of something as sacrosanct as the liquor ban reflects the government’s commitment to go the extra mile for GIFT,” says a senior government official. “It also sends a clear message to those trying to come in the way of the project’s progress.”