India's $4–5 billion investment plan is unveiled by UAE’s ADIA through Gujarat’s finance hub.

UAE's sovereign wealth fund ADIA unveils $4-5 billion India investment plan via Gujarat

Share on:

The largest sovereign wealth fund in the United Arab Emirates, Abu Dhabi Investment Authority (ADIA), is getting ready to introduce a sizable $4–5 billion fund targeted at investing in India through Gujarat International Finance Tec-City (GIFT City), a tax-neutral finance hub.

Two unidentified sources with firsthand knowledge of the situation reportedly told Reuters that ADIA had received in-principle clearance to create the fund from GIFT City's financial services regulating body.

This strategic move by ADIA positions the sovereign wealth fund as the trailblazer in making investments in India through GIFT City, as initially disclosed in a joint announcement by the UAE and India last July.

The regulatory approval, which was not previously publicized, is a positive development for the fund's introduction into the Indian market.

ADIA's representative refrained from providing a statement, and inquiries made to the hub's regulating organization, the International Financial Services Authority (IFSCA), were not returned.

According to one of the sources, the $4–5 billion fund is anticipated to be operational by the middle of this year.

The methodical investment of these allotted monies in India will represent a significant financial advancement for the area.

Assets that can be invested in include debt securities, international and Indian stocks, and more.

Prime Minister Narendra Modi's home state of Gujarat is home to GIFT City, which has been receiving prominence as his government looks to increase its financial significance.

One of the recent proposals is to permit shares of unlisted Indian enterprises to be immediately listed on city exchanges.

A "gateway for global capital and financial services for the economy" is how GIFT City is intended to be used, as Finance Minister Nirmala Sitharam emphasized during the budget announcement.

The acceptance of ADIA to operate in GIFT City is considered a historic move, as it coincides with Prime Minister Modi's planned visit to Abu Dhabi for the inauguration of a stately temple.

With trade reaching $85 billion for the fiscal year ending in March 2023, this action enhances the bilateral ties between India and the UAE.

The UAE is also the location of one of the biggest Indian diaspora communities globally, making up almost 35% of the nation's overall population.

GIFT City's financial environment beckons with alluring advantages, including as a 10-year tax break for businesses that establish themselves there.

Furthermore, there are no taxes levied on money transfers from foreign countries, giving access to Indian markets.

Long-term capital gains taxes on investments made in India will not apply to ADIA or its subsidiaries; this is a specific provision that will last until March 2025 ([Reuters]).

GIFT City had 95 local and worldwide funds as of December 2023, with investments surpassing $2.93 billion and commitments totaling $30 billion.

The growing attraction of this finance hub is seen in the International Financial Services Authority's (IFSCA) active participation in early conversations with other sovereign wealth funds to establish operations in GIFT City.