Nilesh Shah |  GIFT IFSC: Create an ecosystem that makes GIFT a global hub: Nilesh Shah

Nilesh Shah | GIFT IFSC: Create an ecosystem that makes GIFT a global hub: Nilesh Shah – Mail Bonus

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

Singapore and Hong Kong have emerged as financial services hubs in Asia. The setting up of GIFT-IFSC and subsequent devolution of powers to a unified regulator, the International Financial Services Center Authority (IFSCA), was a key step in the right direction to develop India as a global financial hub.

In a short span of time, GIFT-IFSC has emerged as an important global financial hub. While the IFSCA has taken numerous steps to build a strong global financial hub, some concerted steps are needed across the ecosystem to be a global investment hub.

Let us focus on the steps required to make IFSC a global investment hub.

Leverage the local market and encourage investment managers

Majority of the FPI/FDI investment exceeding one trillion dollars in India is channeled from international financial centres. We need to roll out the red carpet for international investors to set up operations in IFSC.

The IFSCA’s recent initiative to monitor fund managers vis-à-vis funds is a step in the right direction. We need to develop a framework such as a variable capital company in Singapore to provide operational flexibility and cost efficiency to global investors.

We need to have an unambiguous tax policy, the absence of which has deterred FPIs from setting up shop in India. Preferential access can be offered for outbound investments from the domestic fund management market to attract investment managers.

Develop an ecosystem for investment managers

We need to leverage our funding between accountants, fund managers, lawyers, consultants and board members for confidential oversight to create a plug-and-play ecosystem. Our KPO industry already serves the global investment management community.

Talent pool

Financial services require the right talent pool. We need to attract talent from other jurisdictions to emerge as a regional powerhouse. Attracting international talent requires creating the right infrastructure, long-term work permits, competitive tax policies, etc. Given the social and cultural infrastructure of Gandhinagar, it may be worth considering a policy of minimum time spent at the IFSC initially.

Appropriate involvement of educational institutions will be essential to ensure a regular supply of talent. Current employees will require updating their skills and exposure to global best practices. The recent budget announcement for the establishment of foreign colleges in IFSC is another step in the right direction.

Future ready

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Fin-techs are disrupting financial services. Volume and passive investments interfere with active investments. ESG has become a benchmark in the investment process. Sustainability is the new buzzword in the financial world. IFSCA must focus on new trends and disruptions to be future ready. We must attract international financial institutions and investment managers with the appropriate ecosystem for sustainability centers, green finance, ESG analytics, etc. invest. Competing with peers for new trends will outperform established ones.

The rule of law

Despite the repeal of many unnecessary laws, the compliance burden is heavy as many statutes apply to a single activity.

We must benchmark ourselves against our peers and deliver superior rule of law to investment managers. IFSCA has built a regulatory framework through extensive collaboration with industry and international peer benchmarking. However, apart from IFSCA, there is a need to streamline rules and regulations, in the areas of taxation, arbitration, commercial dispute resolution, etc.

Our aim should be to ensure a regulatory framework where international investors will not consider India as an arbitration center / are willing to resolve disputes under Indian law.

Innovation and development of financial markets

Although there are no intellectual property rights on financial innovations, we have lagged behind in encouraging financial innovation. Our regulatory approach is like that of legendary opener Sunil Gavaskar: don’t take risks, avoid defeat. It’s time to switch to Virendra Sehwag style – take risks and go for the win.

A vibrant domestic market is a prerequisite for becoming an international financial center. Our financial market infrastructure and supervision are on par with international markets. Product innovation will help deepen the markets.

India had little opening during Y2K to enter the IT services space. We took advantage of that opening to emerge as a dominant player in global IT services. The transition was not instantaneous. It required sustained efforts on the part of IT players and the government.

We need to replicate the success of IT services in financial services. Setting up a unified regulator in the form of IFSCA is a step in the right direction to make India a global financial hub. However, it needs sustained support from the government and the domestic ecosystem to ensure that India provides the operational flexibility and cost-effectiveness to attract international investment management firms from other jurisdictions.

(The author is a manager at

asset management company)

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