GIFT City is great, but Hyderabad deserves 2nd IFC

Finance Minister reviewed the progress of GIFT City’s International Financial Services Centre (IFSC).Inspiration for GIFT City was Hyderabad’s Financial District which was constructed by 2004 within 4 years of launch. With highest order tax benefits and support from Government of India, GIFT City built good ecosystem. It includes 1,150 operational organizations including 37 banking units, 217 fund management entities, 36 insurance companies, 35 aircraft lessors, 36 ship leasing entities, 2 international exchanges, international universities, asset managers, fintech firms, consulting organizations, and financial services.

GIFT City, which is short form of Gujarat International Finance Tech-City, was conceived by IL&FS as a joint venture between IL&FS and government of Gujarat. Construction commenced in year 2011and completed by 2015 and Government of India gave formal recognition as International Financial Services Centre (IFSC). Later, government acquired stake of IL&FS to become 100% owner. As IFSC is the core of GIFT City, IFSC and GIFT City became synonyms. In year 2020, IFSC Authority was established. The powers of RBI, SEBI, IRDAI, and PFRDA under 13 legislations to govern financial products and solutions are transferred to IFSCA. Thus, GIFT City formally became India’s first International Financial Centre (IFC).

For a vast and fast growing economy like India, only one IFC is insufficient to capture capital inflows, diversify, avoid brain drain, leverage existing infrastructure, create holistic economy, and facilitate sustainable global integration. Since Hyderabad is strategically located with access to all States, it is the natural choice to have India’s 2nd IFC. Hyderabad is India’s 5th largest city and has $100 billion (Rs. 10 lakh crores) Gross Domestic Product (GDP), which is expected to cross $200 billion by year 2035. Hyderabad is India’s pharma capital, 2ndlargest IT hub, and 2ndlargest aerospace & defence hub.

It has more than 360 GCCs employing 3,00,000 persons and contributing 20% of India’s GCC market. Amazon, Google, and Microsoft have their world’s largest offices in Hyderabad besides in their home countries. For many global corporations, Hyderabad is the base. With 1,500 plus software companies, Hyderabad is India’s 2nd largest IT hub, next only to Bangalore which has 10,000.Hyderabad has many data centres and is adding more storage capacities. With 45 lakh employment including 10 lakhs in software, Hyderabad contributes 98% of formal employment in entire Telangana.

IFC requires pro-business regulatory environment, tech talent, financial talent, world-class physical infrastructure, good law &order, reliable power supply, and global connectivity. The city enjoys administrative independence, law & order, friendly policing, multi-culture, multi-faith, and widely spread geography with scope for expansion on multiple sides. It also has tech & finance convergence, talent pool, and pro-business leadership. The business operational costs are very low in Hyderabad when compared with other major cities.

A second IFC at Hyderabad helps India to have war-safety, strategic strengths, widened global connect, and balanced development in the country; it will also help India in building the capacities to compete with global financial centres such as Singapore, and Dubai. Since Hyderabad has almost all the infrastructure, it just needs the core establishment and tax incentive provisions. Therefore, Government should establish 2nd IFC at Hyderabad and avoid risk concentration, disorientation, and artificial restriction of growth in other places.

-Dr. Kishore Nuthalapati

(Dr. Kishore Nuthalapati is the Regional Director of PRMIA, US for Hyderabad Chapter covering Telangana and Andhra Pradesh. He is serving as the CFO of BEKEM Infra Projects Pvt Ltd, Hyderabad. Views are personal.)