With rapid growth in India over the last decade, building the infrastructure is seen as vital in order to cement the country’s place as a …
With rapid growth in India over the last decade, building the infrastructure is seen as vital in order to cement the country’s place as a thriving destination for global business. Although much of India’s financial business is done in Mumbai, Delhi and Bangalore, these financial centres suffer from a muddled infrastructure system built over many decades. A vast number of Indian cities seem old and unappealing to international business when compared to relatively modern financial hubs like Dubai, Singapore or Hong Kong.
India has plans to address these concerns. Hugely ambitious proposals include the Delhi-Mumbai Industrial Corridor (DMIC) project, which will see 24 new cities built within a corridor that stretches from New Delhi to the current financial hub in Mumbai, as well as greatly improved transport infrastructure. The corridor will pass through the eastern part of the state of Gujarat – a state popular with investors due to its relative lack of red tape, and the strong inclination to become a global business centre.
“The implementation of phase one of the project has already started and we are developing nearly 13 million square-feet of Built Up Area (BUA)”
Part of the state’s ambitious plans include a new city known as the Gujarat International Finance Tech-City (GIFT), that will seek to be a global financial destination to rival Dubai and Singapore. The city will be built on 886A of land in the centre of the state, and hopes to attract financial and technology firms from other Indian cities including Mumbai, Bangalore and Gurgaon. Funded through a partnership between the government of Gujarat and the privately held company Infrastructure Leasing & Financial Services (IL&FS), it is hoped that all phases of the city will be completed by the end of 2020.
An ideal location
Ramakant Jha, the director in charge of the GIFT project, says Gujarat is the perfect place for such a development because of the improvements to the infrastructure: “First and foremost is the entrepreneurial skill that Gujarat possesses. Secondly the development of Gujarat is based on the focus in the area on the development of infrastructure. This helps to connect the businesses in the various parts of the state. That is one of the strong points that the state is doing well.” The region currently has one international airport, as well as 14 that operate domestically.
Part of the benefits of the region to business is the availability of numerous natural ports, which act as a gateway to the rich, landlocked northern and central parts of India, and provide access to the major port-based countries including the UK, Australia, China, Japan, and Korea. “That really helps the manufactures and the service providers connect to the rest of the world and send their goods in a very timely and cost-effective way.” He says that Gujarat is “spearheading the Indian march for global economic superpower status,” and that the region has been dubbed the ‘Growth Engine of India.’ This is reflected in the fact that Gujarat alone contributes 16 percent of all of India’s industrial production.
The GIFT project is an opportunity for the region to create an international financial hub, rivalling many throughout the world. It’s an ambitious plan, but one that Jha believes is vital for India to have a recognised financial centre that businesses want to move to: “This is the first time in India that this particular type of centre has been recognised as an International Financial Service Centre (IFSC). Whereas there are IFSCs in London, Dubai, Singapore and Hong Kong, there is no IFSC in India. This is the first time the government in India has recognised this particular city and region as an IFSC. In the future, all the foreign exchange transactions that have not until recently been done in India, can now be conducted in here.”
Utilising the local economy
In the past, large financial deals involving Indian companies usually happened outside of the country. “The recent deal where Tata took over Corus, the entire financial deal had to close in the UK. It could not borrow the foreign exchange in India, in order to pay for the company in the UK. It was not able to borrow in India because the regulators did not permit it and there was not an international financial centre. With a recognised financial centre in India, the deal could have happened here, and they would have been able to borrow at a lower cost and conclude the deal very fast.”
Jha adds that with so many cash-rich Indian companies going out in the world, an international financial city in India is vital for them to realise the benefits. “The first opportunities will come from the Indian companies, because they are the ones with a lot of cash on hand and they are the ones that are going outside India to buy other companies.”
Competing with these financial cities is not something that the GIFT team is focusing on.
Jha says the city will instead complement them. “We feel that going forward our city will synergise with other financial centres because of the time differences to other centres. India’s position can help the others work around the clock. We do not see ourselves competing.”
The project has seen considerable enthusiasm from the financial sector, which Jha believes is due to the confidence already in place in the region. “Gujarat has started to become very user and business friendly. The number of companies that are putting their offices and businesses in Gujarat has been steadily increasing.
“It really helps that there is already the confidence which was brought into this state, by the steps the government has taken. The confidence is already there, so we are trying to combine this confidence and the strength of the government’s infrastructure development into an internationally recognised hub for financial services.”
Attracting businesses to the region has begun, with a burgeoning auto-industry already in place. Jha says: “Because of foreign investment, a lot of automobile businesses are doing very well here. You have a lot of foreign manufacturers, like Ford and Peugeot, basing the manufacturing plants here. The Tata Motors Nano plant has meant a lot of manufacturers have moved here. We also have other companies, including Bombardier.” Other firms investing in the city include Chinese technology manufacturer Huawei, which is set to provide the technological infrastructure.
Progress in building the city was held up initially by the slow process of persuading all interested parties that a project of this magnitude was right for the region. Launched in 2007, the original plan was to have the city operational by 2017. Delays pushed that back by a couple of years, and now it’s expected to be completed by 2020. Jha says, however, that “acceptance is now there and it is really moving ahead very fast.”
Some criticism of the project came from groups that felt it would ruin the landscape of the region. Jha says GIFT recognise the importance of the agricultural sector in the state, and as land is increasingly valuable, it has looked to make the most out of what land is available. The development will build vertically, while including green spaces around the high-rises, even though the land being built on was formerly a wasteland.
With phase one already underway, this stage should be completed over the coming year. “In terms of the GIFT development, the entire master plan for the project has been finalised. The implementation of phase one of the project has already started and we are developing nearly 13 million square-feet of Built Up Area (BUA). The whole development project will go up to 62 million square-feet BUA, and provide all of the necessary infrastructure like water; roads; district cooling systems; power; waste management; and ICT infrastructure, all provided by the company.”
GIFT does not intend to simply build a business hub, however. It recognises the importance of developing a city that offers more than just business opportunities – but also as a place to live, says Jha: “Our main focus is to develop the global financial hub and the central business district first. However, we also feel that if you develop the central business district in isolation, it does not help people to have a work life in one place. What we are doing is planning an integrated development that includes residential areas; a hotel; a club; an international school; and a golf course.”
GIFT also hopes that its success will act as inspiration for other financial hubs to be built throughout India. The contribution that the hub will generate for the government is considerable. GIFT say that by 2020 there will be one million people employed, directly and indirectly, in the city. It will also generate $10bn a year in foreign exchange.
For a region that was decimated just a decade ago, it is encouraging to see such enthusiasm for India’s regeneration.