By Renni Abraham

Why has Mumbai, in Maharashtra, not already been designated an International Financial Services Centre (IFSC) status or a GIFT City (Gujarat International Finance Tec-City) component like Ahmedabad in Gujarat? Business analysts are positive that India will progress to become the world’s third-largest designated economy, but this can only happen after establishing several IFSCs encompassing free trade zones.

These IFSCs should not be limited to Mumbai alone, which already boasts a natural business ecosystem, but should also be incubated in cities like Chennai, Kolkata, Bengaluru, Hyderabad, Mangalore, and other states, each respectively designated as dynamic International Financial Services Centres.

Much like Kolkata, which once proudly held the title of India’s corporate capital, hosting offices of most major business groups until the late 1960s before witnessing a decline in industrial presence that shifted outside present-day Kolkata – is Mumbai on a trajectory towards a similar fate of business relegation? This concern persists, especially in light of recent business project plans exiting Maharashtra, underscoring the need for strategic interventions to safeguard Mumbai’s status as a thriving business hub.

A senior official from the Maharashtra secretariat (Mantralaya) acknowledges that Mumbai is facing accelerated losses, particularly following the second phase of additional concessions, incentives, and relaxations in laws introduced in Ahmedabad’s GIFT City. Speaking anonymously, the official states: ‘If Mumbai is to become an IFSC or acquire its own GIFT City component, no land parcel other than BKC will be suitable for Maharashtra. We have effectively split our existing resources in two. We are all complicit in Mumbai’s failure to consistently secure IFSC status, whether under PM Manmohan Singh’s regime in 2004 or during the announcement of Ahmedabad as India’s only GIFT city, now being nurtured and consolidated into an international business services centre. While it may take 10-15 years to materialise, it remains their favoured project, even as Mumbai faces an apparent downturn in business amid India’s economic recalibration.”

Political helplessness

He adds: “GIFT cities are not merely an urban planning concept of brick and mortar but a government policy decision. Mumbai is still competing with Dubai at its respective level to attract trade and investment into Maharashtra, leveraging the natural ecosystem of Mumbai. There is a sense of political helplessness in publicly addressing the issue today, despite the will and full awareness of the urgency to bolster India’s economy with more IFSCs.” A senior CMO official cited state government limitations, stating it was a national policy issue, and declined further comment on why Mumbai faces the prospect of business relegation.

The Gujarat International Finance Tec-City, also known as GIFT City, is a central business district currently under construction in the Ahmedabad district of Gujarat, serving as India’s only greenfield IFSC. Mumbai initially missed its opportunity in 2004 when the proposal to establish it as India’s first IFSC was rejected by the Reserve Bank of India. This decision came during the tenure of Prime Minister Manmohan Singh, an economist who led the country’s political and international finance affairs.

Dr Joseph Thomas Kanayamplakal, Head of Research at Emkay Wealth Management, commented: “Things have improved significantly. When discussing the need to compete with Dubai and Singapore, it’s important to remember that Dubai established the Dubai International Financial Centre (DIFC) approximately 20 years ago. India is now attempting something similar through the GIFT City in Gandhi Nagar. They plan to expand it from the current 800 acres to around 3,500 acres, incorporating residential areas, universities, parks, and other amenities. This marks just the beginning of the GIFT City concept, which offers numerous benefits, ease of doing business, and facilities. Consequently, many financial brokerages and portfolio management firms have opted to relocate to GIFT City rather than remain in Singapore."