GREENVISSAGE EXPLAINS: Can gift city revive india’s financial landscape?
When Finance Minister Nirmala Sitharaman inaugurated the new Foreign Currency Settlement System at Gujarat International Finance Tec-City (GIFT City) earlier this year, it was more than just another financial policy announcement. It symbolised India’s renewed determination to reclaim offshore financial activities and position itself as a serious player in global finance. By enabling real-time dollar transactions within Indian borders, without routing through foreign intermediaries, India took a symbolic step toward financial sovereignty. Yet, beneath the celebratory rhetoric lies a complex reality: GIFT City remains an audacious gamble, one that pits India’s top-down economic planning against the organic evolution of global financial ecosystems.
GIFT City was conceived in 2007 as an ambitious plan to create a financial hub on the banks of the Sabarmati River, between Ahmedabad and Gandhinagar. The goal was to replicate the success of Singapore and Dubai, financial centres that transformed small economies into global finance magnets. The vision was to make GIFT one of the top five international financial centres (IFCs) in the world, a self-contained ecosystem where banks, funds, insurers, fintechs, and exchanges could transact freely in foreign currencies under a liberal regulatory regime. But building a financial city from scratch is not like constructing another industrial park. Global finance thrives on network effects, the interplay of trust, liquidity, legal predictability, and human capital that cannot simply be manufactured through infrastructure. Cities such as London or New York did not emerge from master plans; they grew organically over centuries of trade, maritime activity, and capital accumulation. Dubai and Singapore, while more deliberate, still took decades to mature, relying on strategic openness, political stability, and flexible governance.
A financial hub depends on three intertwined factors: liberal capital mobility, legal autonomy, and deep liquidity. India’s financial architecture, however, has historically been risk-averse and protectionist. Strict foreign exchange controls, complex tax rules, and overlapping regulators have long deterred global investors. GIFT City was designed to circumvent these obstacles through the International Financial Services Centres Authority (IFSCA), a unified regulator meant to replace the overlapping jurisdictions of the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Ministry of Finance. In theory, this arrangement allows GIFT to function like a foreign jurisdiction within India, where offshore-style transactions can occur without the heavy hand of Indian regulations. In practice, however, this autonomy remains constrained. The RBI and SEBI continue to exercise influence over key decisions, often wary of excessive liberalisation that could lead to tax arbitrage or regulatory evasion. When the IFSCA allowed new family offices to register in GIFT City, the RBI intervened to pause approvals over concerns that it might become a conduit for unregulated capital flows. Moreover, GIFT City lacks an independent legal system akin to the Dubai International Financial Centre (DIFC) or Singapore’s International Commercial Court. Disputes arising in GIFT are still adjudicated in India’s conventional court system, plagued by delays and procedural complexity, eroding confidence among global investors who prize judicial efficiency. Without a robust legal framework separate from India’s domestic system, GIFT’s promise of a transparent, efficient financial jurisdiction remains incomplete.
Perhaps GIFT City’s most visible failure so far is urban, not financial. A financial hub is not just an office district; it is a living organism. It thrives on dense networks of professionals, schools, nightlife, restaurants, and cultural vibrancy. Today, GIFT City is home to roughly 28,000 workers, most of whom commute daily from Ahmedabad or Gandhinagar. Few choose to live there. The streets are empty by evening, and despite the gleaming skyscrapers, the city often feels like a ghost town. The collapse of IL&FS, one of the key promoters of GIFT City, in 2018 dealt a severe blow to the city’s real estate and infrastructure momentum. Many residential and commercial projects stalled, and the lack of a robust urban fabric discouraged long-term settlement. For senior professionals with families, GIFT lacks the social and educational amenities found in Mumbai or Bangalore. Without this human capital base, the city risks becoming an administrative enclave rather than a dynamic ecosystem.