Global Financial Centres and GIFT City

Global finance concentrates in a handful of cities: New York, London, Singapore, Hong Kong, Tokyo and increasingly Dubai.

Why finance clusters

• Talent: bankers, lawyers, accountants and analysts gather where jobs are.
• Networks: face-to-face contact and information sharing.
• Legal systems: trusted courts and contract enforcement, often based on English common law.
• Time zones: London sits between Asian and American trading hours.
• Regulation and taxes: clear, stable and competitive rules.
• Infrastructure: telecommunications, airports and quality of life.

These are agglomeration economies: the more firms in a place, the more attractive it becomes.

Competition among centres

Centres compete to attract banks, funds, exchanges and fintech companies. After Brexit, some activity moved from London to cities like Dublin, Frankfurt, Amsterdam and Paris, though London remains a leading centre. Dubai has grown rapidly as a hub for wealth and trading.

Mumbai

Mumbai is India’s financial capital, home to the RBI, SEBI, major banks and stock exchanges. But India’s capital controls and taxes meant that much offshore trading in Indian assets happened in Singapore or Dubai.

GIFT City

To bring this business home, India created an International Financial Services Centre at GIFT City in Gujarat, with:

• Special tax benefits.
• A unified regulator, the International Financial Services Centres Authority, set up in 2020.
• Transactions in foreign currency.
• Exchanges trading derivatives on Indian indices; trading in Nifty futures moved from Singapore to GIFT City in 2023, under an arrangement known as GIFT Nifty.

GIFT City hosts banks, funds, aircraft leasing and insurance businesses, though it is still small compared with established hubs.

Challenges

• Talent and lifestyle attractions.
• Legal certainty and dispute resolution.
• Capital controls in the rest of India.