Content

1. Smart Finance, Smart Future: GIFT City
2. 8.2% GDP: India’s Growth Story Strengthens

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Smart Finance, Smart Future: GIFT City

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What is GIFT City?

• India’s first International Financial Services Centre (IFSC) under SEZ Act, 2005.
• Located in Gandhinagar, spread over ~1000 acres, expanding to 3300+ acres (DTA + GIFT SEZ).
• India’s first operational smart city + integrated financial hub.
• Hosts 1034+ registered entities, 38 banks, asset base $100.14 bn.
• Offers 10-year income tax holiday in a 15-year block.
• Competes with Singapore, Dubai, Hong Kong.

Relevance:

GS 3 – Economy

• International Financial Services Centre (IFSC): role in financial sector reforms.
• Capital markets, global financial integration, offshore vs onshore financial hubs.
• Regulatory architecture (IFSCA Act 2019) → institutional reforms.
• SEZ Act, tax incentives, competitiveness in global finance.

GS 3 – Infrastructure

• Smart city infrastructure: district cooling, utility tunnels, zero-discharge water, 99.999% power reliability.
• High-speed connectivity, metro linkages, airport access.
• Tier-IV data centre & digital backbone as critical infrastructure

Origins and Vision

• Conceived to bring offshore financial services onshore.
• Aims to position India as a top global financial centre by 2047.
• Strategy pillars:
  • Attract global capital
  • Enable regulatory innovation
  • Build fintech-led financial infrastructure
  • Generate high-skilled jobs
• Government-backed integrated planning ensures walk-to-work, sustainability, ease of doing business.

 

Governance and Regulatory Architecture

International Financial Services Centres Authority (IFSCA)

• Statutory regulator under IFSCA Act, 2019.
• Unifies powers of RBI, SEBI, IRDAI, PFRDA for IFSC.
• Regulates products, institutions, conduct, supervision.
• IFSC units treated as non-residents under FEMA → enhances international competitiveness.

Single Window Governance

• Powers delegated from SEZ Development Commissioner to IFSCA.
• SWITS (Single Window IT System) enables integrated approvals.

Key Institutions

India International Bullion Exchange (IIBX)

• Launched 2022; world-class bullion trading ecosystem.
• Complies with OECD due diligence standards.
• Enables transparent gold imports and bullion-linked financial products.

Financial Ecosystem Snapshot (2025)

• Fund Managers (FMEs): 194
• IFSC Exchanges: 2, monthly turnover $89.6 bn
• GIFT NIFTY monthly turnover: $102.35 bn
• Insurance + intermediaries: 52
• Aircraft lessors: 37 (303 aircraft leased)
• Ship lessors: 34 (28 ships leased)
• Banking assets: $100.14 bn
• Cumulative transactions: $142.98 bn

GIFT City as a Global GCC/GIC Hub

• Financial groups set up Global In-House Centres (GIC/GCC) under IFSCA GIC Regulations, 2020.
• Operate in foreign currency; serve global markets.
• Major players:
  • Infineon (750 staff), Technip Energies (500), TELUS (500)
  • Accenture, Capgemini, IBM, NASSCOM CoE

FinTech Growth Engine

Regulatory Framework

• FinTech regulations notified April 2022.
• Dual entry route: Direct Authorization + Sandbox.
• 20 FinTech/TechFin entities, 8 sandbox participants.
• Big players: Wipro, Infosys, Cognizant, Hexaware, KFintech, Signzy.

Fintech Innovation & Research Centre

• Joint initiative: Govt of Gujarat + Asian Development Bank.
• Partners: IITGN, Ahmedabad University, UC San Diego, Plug and Play.
• Focus: R&D, incubation, global collaboration.

Business Setup Framework

• Entities must be from FATF-compliant jurisdictions.
• Allowed structures: Company, LLP, Branch.
• Must be linked to financial products/services.
• IFSC units = non-resident status → regulatory clarity.

Infrastructure Excellence: GIFT as a Smart City

Utility Innovations

• District Cooling System: 30% energy saving.
• Automated Waste Collection System: Pneumatic, zero manual transport.
• 17-km Utility Tunnel: Digging-free city.
• Zero-Discharge Water: 24×7 potable supply; sewage reuse.
• Power Reliability: 99.999% uptime (≈5.3 min outage/year).
• Tier IV Green Data Centre: 99.999% uptime + global certifications.

Transport Connectivity

• Metro to Ahmedabad–Gandhinagar.
• 20 min from Ahmedabad airport.
• 15 min from high-speed rail terminal (proposed).
• EV bus network; NH-48 Delhi–Mumbai corridor.

Social Infrastructure

• 21-acre Central Park, riverfront, Lilavati Hospital.
• City Command Centre (C4): SCADA-based utility monitoring; 70,000+ I/O sensors.

Talent and Education Hub

• Access to top-tier institutions: IIM-A, IIT-Gn, GMU.
• Local professional pool:
  • 86,000 software engineers
  • 71,000 finance professionals
  • 21,000 management professionals
  • 142% growth in AI-skilled talent (Ahmedabad).

Global Universities

• Operational: Deakin University, University of Wollongong.
• Upcoming: Queen’s University Belfast, Coventry University.
• AISPs enable foreign campuses via infrastructure support.

Business Highlights (2025)

• 1034+ entities across finance, insurance, capital markets, fintech, leasing.
• Jumped to 46th in Global Financial Centres Index (2025).
• Ranked 5th among emerging centres; topped reputation index.
• Dollar loan market: $20 bn disbursed; overtook Singapore, London for India-linked dollar loans.

Fiscal & Non-Fiscal Incentives

Direct Tax

• 10-year tax holiday within 15-year block (Sec 80-LA).
• Reduced TDS on interest income.

Indirect Tax

• No GST on IFSC transactions.
• Custom duty exemption for SEZ imports.

Other Incentives

• No STT, CTT, stamp duty.
• Exemptions under Companies Act.
• 100% PF reimbursement.
• Gujarat IT/ITeS incentives: CAPEX/OPEX support, electricity duty waiver.

Why GIFT City is Rising Globally ?

• Unified regulator + predictable policy regime.
• Offshore-like environment within Indian jurisdiction.
• High-end infrastructure + global-grade digital backbone.
• Increasing shift of treasury operations, aircraft leasing, ship leasing, fintech innovation to GIFT.
• Strategic location in one of India’s fastest-growing economic corridors.

Challenges & Concerns 

• Needs deeper liquidity, global investor diversity.
• Global competition from Singapore, Dubai, Shanghai.
• Talent density still lower than global hubs.
• Fiscal incentives must align with WTO rules.
• Regulatory adaptation needed for emerging products (crypto-assets, carbon markets, green finance).

Why It Matters ?

• Instrument for financial sector reforms, capital account liberalisation.
• Aligns with Viksit Bharat 2047, Make in India, Aatmanirbhar Bharat.
• Anchor for India’s fintech and digital public infrastructure exports.
• Critical for globalising Indian rupee, boosting India-linked dollar loan markets.
• Enhances India’s position in global financial diplomacy.

Conclusion

• GIFT City has evolved into India’s most ambitious financial ecosystem—combining global-grade regulation, infrastructure, talent, and incentives.
• Its fast-growing fintech, aircraft leasing, bullion trading, and capital market segments position it as a future rival to global hubs.
• With sustainability and innovation at its core, GIFT City is central to India’s aspiration to become a top global financial centre by 2047.

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8.2% GDP: India’s Growth Story Strengthens

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Why Is This in News?

• PIB released Q2 FY26 macroeconomic data showing 8.2% real GDP growth, reaffirming India as the fastest-growing major economy.
• Headline CPI dropped to 0.25% (record low in current series), raising debate on disinflation, deflation risks, and policy stance.
• IIP, exports, labour participation, and GST collections showed broad-based improvement, signalling strong domestic momentum despite global slowdown.

Relevance:  

GS 3 – Economy

• Macro indicators: GDP, GVA, CPI, WPI, IIP → core macroeconomic fundamentals.
• Sector-wise performance: primary vs secondary vs tertiary.
• Disinflation, deflation risk, monetary policy trade-offs (RBI 2–6% band).
• Labour market dynamics: LFPR, WPR, unemployment, EPFO data.
• Export performance: services dominance, electronics exports → value-chain upgrading.
• PLI scheme impact on manufacturing revival.
• Fiscal indicators: GST revenues, structural reforms.
• Global agencies’ growth projections → investor confidence.

 What Is GDP and Why It Matters

• GDP = market value of all final goods and services produced within a country.
• Real GDP adjusts for inflation → reflects true output growth.
• GVA = GDP + taxes – subsidies; shows sectoral strength.
• GDP growth indicates economic momentum, investment cycles, employment generation.

Headline Findings (Q2 FY26 + Apr–Sep H1)

GDP

• Real GDP: 8.2% in Q2 vs 5.6% last year.
• Real GDP H1 FY26: 8% vs 6.1% in FY25.
• Nominal GDP Q2: 8.7%.

Sectoral GVA

• Primary: 3.1% (weather-linked, structural stagnation).
• Secondary: 8.1% (manufacturing-heavy recovery).
• Tertiary: 9.2% (services remain the growth engine).

 Inflation Trajectory (CPI + WPI)

CPI (Retail Inflation)

• October 2025 CPI: 0.25%, lowest in current CPI series.
• Food inflation (CFPI): –5.02% → major driver of disinflation.
• Rural CPI: –0.25%; Urban CPI: 0.88%.

WPI (Wholesale Inflation)

• October 2025 WPI: –1.21%.
• WPI food inflation: –5.04%.
• Driven by lower crude, metals, food prices.

Policy Interpretation

• Inflation well within RBI’s 2–6% band.
• Supports neutral–accommodative monetary stance.
• Raises medium-term questions: disinflation vs demand softening.

  Industry & Manufacturing: IIP Signals

IIP (September 2025)

• Overall IIP: 4% YoY.
• Manufacturing: 4.8% → main driver.

Top Sub-sectors

• Basic metals: 12.3%.
• Electrical equipment: 28.7%.
• Motor vehicles: 14.6%.

Use-Based Classification

• Infrastructure/Construction Goods: 10.5%.
• Consumer Durables: 10.2%.
• Intermediate Goods: 5.3%.

Interpretation

• Strong investment cycle revival.
• Healthy demand for consumer durables.
• Manufacturing expansion aligns with PLI impact.

 Employment Trends: Labour Market Strength

Macro Labour Indicators

• LFPR: 55.4%, highest in 6 months.
• WPR: 52.5%.
• Unemployment: 5.2% (stable).
• Female LFPR: 34.2% (improving but structurally low).

EPFO Data

• Net additions: 21.04 lakh in July 2025.

White-Collar Hiring (Naukri JobSpeak)

• Hiring up 10.1%.
• AI-ML jobs: +61%.
• Fresher hiring: +15%.

Interpretation

• Labour market broadening across sectors.
• Services + technology driving job growth.
• Need for continued skilling to align workforce.

 Trade & External Sector

Exports (Apr–Oct 2025)

• Combined exports: +4.84% (USD 491.8 bn).
• Merchandise exports: +0.63%.
• Services exports: +9.75% (USD 237.5 bn) → India’s stronghold.

Top Merchandise Growth Areas

• Electronics: +37.8%.
• Cashew: +28.32%.
• Other cereals: +25.52%.
• Marine products: +16.18%.

Export Market Growth

• Spain: +40.7%.
• China: +24.8%.
• Hong Kong: +20.7%.
• USA: +10.1%.

Interpretation

• India moving up value chains.
• Services cushion global goods-market slowdown.
• PLI boosting electronics export capability.

 Government Policy Push: Structural Drivers

Manufacturing

• PLI: ₹1.97 lakh crore; investment attracted: ₹1.76 lakh crore.
• Skill India, Make in India → ecosystem building.

Labour Market

• PMKVY → 27 lakh trained.
• NAVYA → skilling adolescent girls.
• PMMY: ₹4.91 lakh crore sanctioned.
• 17th Rozgar Mela → 51,000 appointment letters.

Trade

• Export realization window extended → 15 months.
• Credit Guarantee Scheme → ₹20,000 crore credit facility to exporters.
• Export Promotion Mission → outlay of ₹25,060 crore.

GST 2.0

• Two-slab structure: 5% & 18%.
• GST collection (Oct 2025): ₹1.96 lakh crore (+4.6%).

  Growth Projections (Global Agencies)

Agency	Projection
RBI	6.8% FY26
World Bank	6.5% (2026)
Moody’s	6.4% (2026), 6.5% (2027)
IMF	6.6% (2025), 6.2% (2026)
OECD	6.7% (2025), 6.2% (2026)
S&P	6.5% (FY26), 6.7% (FY27)

High convergence across agencies → confidence in India’s fundamentals.

 Big-Picture Takeaways

Strengths

• Broad-based GDP growth.
• Manufacturing revival → PLI impact visible.
• Services remain globally competitive.
• Inflation sharply moderated.
• Export ecosystems improving.
• Labour participation improving.

Emerging Concerns

• Excessively low CPI could indicate:
  • demand softening in rural economy,
  • agricultural stress.
• Primary sector growth modest (2.9%).
• Women’s LFPR still low compared to peers.
• WPI deflation may pressure MSME margins.

Strategic Implications

• India entering investment-led growth cycle.
• Strong macro stability enables fiscal room before 2029.
• Disinflation offers policy bandwidth for growth-supporting reforms.
• Need to improve:
  • rural incomes,
  • agricultural productivity,
  • skilling for AI-driven jobs,
  • export diversification.