Recently, China tightened its grip over Hong Kong through a national security law, and it is facing unrest as a result. Many settled in Hong Kong are not comfortable with this, and some foreign investors are considering moving out of Hong Kong. This is an opportunity for India.
Parekh said, “It’s an opportune time for India to attract business at the GIFT City from those exiting Hong Kong. However, a well regulated environment along with attractive tax structure is needed for this. The IFSC can capture both inbound and outbound investments.”
Experts also said that further incentives would be needed, without which it might not be easy to attract funds to operate from GIFT City.
“Many investors and funds that invested via Hong Kong are also looking to diversify to other centres. GIFT IFSC is an alternative that can service not just India oriented investments, but also be a hub for servicing global investors much like Hong Kong, Singapore, Mauritius or other domiciles,” Sesh said.
The GIFT City authorities this week approved 28 proposals from firms for setting up units there. This is expected to generate 2,000 jobs over the next 2-3 years.
BSE-promoted India International Exchange (India INX) has been operating successfully at GIFT City and has an 85 per cent market share there. V Balasubramaniam, the exchange’s MD and CEO, said, “This is clearly an inflection point for policymakers to the attract the fund industry and trading business and create a vibrant financial services ecosystem.” He added that there should be “good regulatory and taxation system that provides certainty, cost advantages and ease of business”.
A banker operating in GIFT City said direct dollar clearing or clearing in other major foreign currencies like the pound and euro is permitted in Hong Kong. India should allow this as it could make a difference.
A Permanent Account Number is required for fund houses that wish to invest in the GIFT City. That requirement should be at scheme level and not fund or platform level. This will help reduce the tax burden, which matters when investments are in more than one scheme of the same fund, the banker said.