GIFT City: A Game-Changer For HNIs Seeking Global Investment Opportunities

In its recent India Development Update, the World Bank reported that India continues to post healthy growth despite subdued global conditions. The World Bank revised the growth forecast for FY25 to 7% from the earlier estimate of 6.6%. 

This positive development came just after the IMF revised India’s FY25 growth forecast upwards to 7% from its earlier estimate of 6.8% on account of improved prospects for private consumption, particularly in rural areas. 

The IMF’s latest data release shows that the Indian economy has outperformed the major economies in the last ten years. India’s GDP has doubled from $2 Tn in 2014 to $3.9 Tn in 2024, a massive increase of 93.1%.

India is expected to become an $8 Tn economy by 2032, while our household wealth has the potential to become $40 Tn. We are in a scenario wherein our HNI population is growing at 16% while our UHNIs are increasing at a double-digit growth, which is exceeding our overall population’s growth. 

It is interesting to note here that the HNIs and UHNIs are unlocking value from their traditional businesses by selling promoter stakes and ESOPs, leading to huge wealth creation in the country. This segment of investors has traditionally invested a large part of their wealth in real estate and now is focusing more on growth-oriented assets (equity products such as mutual funds, PMS, AIFs, or alternate asset classes). 

In the alternate space, their maximum allocation is towards the unlisted space and international investments. Although there are many options for investing in global markets, one of the emerging segments in this space is the GIFT City. This is turning out to be an attractive option to several HNIs and UHNIs who wish to invest via India’s only approved International Financial Services Centre (IFSC).

GIFT City Offers An Array Of Benefits To HNIs And UHNIs

The GIFT City aims to become a hub for international businesses and a price setter instead of a price taker for a few financial instruments, namely bullion. By encouraging entrepreneurship, helping startups expand their domestic businesses, and setting up a world-class infrastructure, GIFT City is making all efforts to be comparable to any other leading IFSC in the world. 

The opportunities and services provided by the GIFT City can help HNIs/UHNIs diversify their portfolios, create assets, and gain exposure to overseas markets.

• Indian residents can easily invest in this option by opening a foreign dollar-denominated bank account with a bank branch based in GIFT City. Both individuals and non-individuals can make outbound investments in equity, debt, or commodities. 
• Individuals’ investment amounts are restricted to LRS Limits of $ 250K. Non-individuals, on the other hand, can invest up to 50% of the entity’s net worth via the Overseas Portfolio Investment (OPI) route.
• NRIs and foreign investors can also invest in Inbound funds (funds that invest in Indian securities). These investments can be made without a PAN card and remain in dollars, too.
• For individuals and non-individuals, the taxation is 20% post-indexation if held for 36 months and 20% post-indexation after 24 months for listed securities on IFSC. The other tax benefits are exemption from STT, CTT, and stamp duty for transactions carried out on IFSC exchanges.
• Additionally, for AIFs registered in IFSC, there is no limit on outbound investments, and a 100% tax exemption can be claimed for ten consecutive years out of a block of 15 years. There is no GST, STT, or CTT, and no concentration norms, while funds can be heavily concentrated, and the setup and operating costs are lower.

Our Take On The GIFT City

The Gift City is an interesting investment opportunity because it allows investors to diversify their portfolios globally rather than parking all their surplus into one asset class/geography. The relaxed investment limit, taxation, regulatory, and operational norms for businesses set up in IFSC make this an exciting option to explore in the coming years. 

In addition, many investment opportunities have opened up for foreign investors, which could only boost foreign inflows into India. Although GIFT City is only in an evolving stage, it has the potential to reshape India’s financial landscape and contribute significantly to India’s journey toward becoming a global economic powerhouse. 

As India continues to be the fastest-growing large economy in the world, the huge wealth creation and the financialisation of savings can significantly benefit investment options like the GIFT City, as investors will continuously look to diversify their portfolios.

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