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ShareThe state's plans have been backed by concrete action
On June 28, just two months after Union finance minister P Chidambaram unveiled plans relating to Mumbai's potential for becoming an international financial centre (IFC), Gujarat unveiled plans to open its Gujarat International Finance Tech-city (GIFT) as the world's largest international finance service (IFS) centre.
Instead of dealing with cross-border finances, it would look at outsourcing finances and local trade.
It appeared a more pragmatic approach to a sector that will always be bedevilled by the creaking dispute resolution machinery India has.
The reluctance of the government to appoint more judges and to help clear the backlog of cases has hobbled growth and pushed up the cost of doing business in the country.
It has also severely restricted the growth of financial services in the country. After all, how can financial services blossom if creditors cannot even take recourse to attaching mortgaged goods in the event of a default in repayments?
Obviously, Gujarat did not believe that India would be in a position to host an IFC. That could explain why it opted for an IFS instead.
Unlike Mumbai, Gujarat's plans were backed with concrete actions. Its location has been finalised -- a 500-acre development project near Gandhinagar, on the banks of river Sabarmati.
Its investment outlay has been pegged at approximately Rs 24,500 crore ($6 billion).
Unlike many projects announced by both the Centre and the government of Maharashtra, the Gujarat government has already allocated land for this project, and has witnessed the signing of MoUs with Kotak Bank, Chescor and IL&FS each expressing a willingness to take up at least one million square feet of office space in GIFT.
The project is expected to become fully functional by 2012. If all goes well, the IFS sector alone could result in 9 million jobs and contribution to GDP of an additional $385 billion by 2020.
The sheer scale and size of the project can be best understood when one compares it with the best financial service centres in the world.
Equally staggering are the plans of further development that is planned to make GIFT the hub of activity surrounded by model townships
The project, as outlined, is to have two parts. One would be the domestic tariff area (DTA), which would account for 250 acres, and the other a special economic zone (SEZ), for which an application has been made by the Gujarat Finance and City Development Company to the Union government for formal approval.
Significantly, to make the SEZ part of the finance city project more attractive, the government has also mooted availability of liquor in this city.
The DTA part of GIFT will have the domestic financial district, domestic techno park, fin/tech services (export oriented undertakings) park, domestic markets zone, and domestic utilities.
The SEZ part of the project is to be further divided into two parts - the processing areas and the non-processing areas.
The processing areas of the SEZ would include international financial service centre, international techno park, Software Technology Parks of India units, international market zone, exchanges, service units, international education zone.
The non-processing areas of the SEZ would have the following: utilities, integrated townships, entertainment zone, hotel/convention centre, shopping malls, health services and schooling.
Broadly speaking, five types of businesses have been targeted in phases:
Global business process outsourcing (BPO) hub for financial services: The Gujarat government believes GIFT will be the preferred off-shoring location for global
financial services players.
Currently, some banks have opted for territories located in Tamil Nadu in south India (Citibank has moved its global back office operations to that place) or at Gurgaon in north India (where GE has moved its back office operations through another associate BPO company).
Gujaratis believe their home state could be the next big hub for all financial services partly because the people of Gujarat have a natural inclination towards finance and commerce, and also because of the infrastructure that is sought to be created at GIFT, which, in turn, could further spur the creation of IFS related activities at GIFT.
Operations hub for domestic financial services: The Gujarat government is confident that it could make GIFT the centralised hub for mid-office and back-office related activities for domestic financial services.
With the surge in banking and insurance and a steep increase in consumer financing, backoffice operations for purely domestic business are also likely to grow exponentially. And that is where GIFT hopes to make a mark.
Global IT hub for financial services: A great deal of emphasis is being paid to the development of the IT infrastructure at GIFT. It could account for almost one-third of the total financial outlay.
This, when implemented, could make it one of the most work-friendly environments to live in.
Global R&D hub for emerging sectors: With the gathering of the best of talent in GIFT and its surroundings, this place could become the preferred R&D centre for industry.
This is likely to be more relevant to the pharmaceutical sector where Gujarat has a distinct lead.
In fact, even today, some of the biggest pharmaceutical players are headquartered in Gujarat, and the state is already the country's centre for industries related to chemicals, super specialty chemicals and petrochemicals.
Financial centre for select product markets: GIFT hopes to emerge as an integrated financial centre dealing with the full set of financial services products including capital markets and trading.
However, this may require some changes in government policy, as full convertibility on the current and capital accounts would be required to be in place before these businesses could opt for any place in India as their operational hub.
