In the heart of India's Gujarat state, a visionary project is taking shape, poised to redefine the country's financial landscape. GIFT City, or Gujarat International Finance Tec-City, is India's most ambitious business-friendly endeavor to date, attracting global attention and investment. As the editor of the Financial Times, Roula Khalaf, explores this transformative initiative, the article delves into the city's rapid development, its unique regulatory environment, and the challenges it faces in becoming a true financial hub.

Pioneering India's Financial Future, One Skyscraper at a Time

Transforming the Landscape: GIFT City's Rapid Rise

Standing on the balcony of his office, K Rajaraman, a veteran civil servant, surveys the panoramic sweep of cranes and skeletal structures that define GIFT City's rapid transformation. This 886-acre work-in-progress, located in the heart of Gujarat, is India's most ambitious attempt to create a business-friendly environment, attracting global attention and investment.

Regulatory Advantages: Unlocking India's Onshore Tax Haven

As the head of the regulator overseeing GIFT City, Rajaraman has recently returned from the United States, where he was drumming up more investment. The city's unique regulatory environment, which includes 100% tax exemptions over 10 of 15 years and avoidance of India's onerous red tape and strict capital controls, has lured a diverse array of businesses, from global financial giants like JPMorgan and HSBC to Australian universities, insurance companies, and local tech titans Infosys and Wipro.

Climbing the Global Ranks: GIFT City's Ascent on the Financial Centres Index

The city's rapid progress is evident in its rising position on the Global Financial Centres Index, which ranks the competitiveness of financial hubs worldwide. From a ranking of 92 three years ago, GIFT City has climbed to the 52nd position, surpassing even the financial capital of Mumbai.

Overcoming Challenges: Transforming Gujarat's Conservative Landscape

However, GIFT City's success is not without its challenges. Located in the conservative and business-focused state of Gujarat, the city faces hurdles in adapting to the needs of its growing workforce and attracting top talent. The state's prohibitive laws, such as its dry status, have required compromises, with the government recently publishing guidelines to allow the sale of alcohol in parts of the city.

Building a Vibrant Community: Overcoming the "Chicken and Egg" Dilemma

Despite the influx of over 20,000 employees, the city remains eerily quiet, with little traffic on its well-paved roads and a slow arrival of entertainment options. Executives setting up offices in GIFT City compare the city's early days to those of Dubai, another arid and previously alcohol-free financial hotspot, acknowledging the challenge of building a vibrant social and cultural ecosystem.

Political Viability: Navigating India's Shifting Political Landscape

The long-term political viability of GIFT City has also come into question, with the weakening of Prime Minister Narendra Modi's political standing following a worse-than-expected electoral showing earlier in the year. As Modi enters his third term, beholden to coalition parties, some observers wonder if the project will survive should India's opposition eventually come back to power.However, Rajaraman remains optimistic, brushing aside such concerns and calling the economic transformation across the country "unstoppable." He believes that the Indian reform story has been continuous for decades, regardless of who has been in power, and that GIFT City's growth is a key part of that drive.