India’s first global bullion exchange, India International Bullion Exchange (IIBX), was inaugurated by Prime Minister Narendra Modi at Gandhinagar’s GIFT city on Friday. The international financial services hub is being seen as an effort by the government to provide more transparency to gold trade in India.
Modi unveiled several initiatives that would help India provide an alternative to Canary Wharf. “Integration with the global markets and supply chain is our major agenda. GIFT City is an important gateway to it. This will help make India a financial superpower,” Prime Minister said.
What is a GIFT City?
GIFT City is a planned business district in the state of Gujarat in India. It is the new business destination offering competitive edge to financial services and technology-related activities. The land between the commercial capital of Ahmedabad and the administrative capital of Gandhinagar was identified for the development of a Central Business District (CBD).
The GIFT city is built on 886 acres and has a multi-service Special Economic Zone (SEZ). It is home to India’s first International Financial Services Centre and also has Domestic Tariff Area (DTA). About 261 acres are marked as SEZ area and 625 acres as DTA. About 62 million sq ft of built-up area would be developed and 67 per cent of it would be commercial space, 22 per cent residential space, and 11 per cent as social space.
Why is the bullion exchange important?
India is the second-largest consumer of gold. It’s the biggest importer of the precious metal and in 2021 had imported 1,069 tonnes of gold, which was an increase of 430 tonnes from a year ago. Gold is heavily regulated in the country. The Reserve Bank of India (RBI)-approved agencies and nominated banks alone can import gold currently.
The new exchange would enable the country to claim its place in the global gold market. It would provide India a chance to be a part of the global value chain. The International Financial Services Centre Authority (IFSCA) would be the regulator. It would oversee the transactions that are presently made internationally. The IFSCA offers services related to aircraft and ship leasing, capital markets, offshore banking and asset management, offshore insurance, and other related services. It has two global stock exchanges that together generate an average daily trading volume of over $11 billion.
It would help providing businesses housed at GIFT City with integrated regulatory infrastructure. The Gujarat exchange is only the third exchange of this kind in the world and would help in making India’s gold trade more organized.
The IFSCA said in a statement that setting up of the bullion exchange shall empower India to gain its rightful place in the gold market and serve the global value chain with integrity and quality. While inaugurating the facility, Modi said that the new projects in the GIFT city would empower India to become a part of the world’s biggest economies and join global financial hubs like the United Kingdon, Singapore, and United States.
What is IFSCA?
The IFSCA is being projected to enable and support innovation, thereby providing a catalyst to growth in the financial services sector. Since IFSCA assumed a formal status, in two years almost two dozen lenders, including HDFC Bank, State Bank of India, HSBC, Bank of America, Axis Bank, and Standard Chartered have doubled their consolidated balance sheet size to $35 billion. The IFSCA operationalised four global trade financing services, which kick started trade financing. Internationally, this would create the first-of-a-kind of a regulator-initiated ecosystem that would facilitate cross-border trade finance with several participants.
The IFSCA has given authorisation certificates to five fintech companies like Signzy Technologies, Q Krishi Quantum, CorpData IFSC, UMBO IDTech, and EdgeVerve, a subsidiary of Infosys. All these companies are involved in agriculture technology sectors.
GIFT City would fulfill India’s dream of becoming self-reliant in high finance. It is set to become a centre of excellence that will take on the continent's money hubs. In an increasingly globalised world order, complex financial engineering has become the norm premised on sustainability.
“I want GIFT to be a gateway for global equity and debt capital for sustainable development,” Prime Minister Modi said. “GIFT should compete with the centres in Dubai and Singapore.”
The exchange is being headed by Gautam, an ace banker from Mumbai, and has roped in as many as 64 qualified jewellers. Several others are in talks to join. “We have a huge market for bullion. India should also be identified as a market maker," Prime Minister Modi said and also added that the exchange was an effort toward that.
