Impact of setting up an IFSC


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.


Establishment of an IFSC in India is necessary for the growth of the Indian financial sector. The impact of this establishment is far reaching. The move is expected to increase the revenue of the country by capturing approximately Rs.1,334 crore per day or Rs.2 lakh crore per year worth of trading in rupee derivatives that presently goes to places outside India. Further, it will help the country to attract global financial service business which is otherwise lost to other countries due to the absence of an IFSC.



The existing regulatory structure and tax regime in the country do not create a conducive environment for foreign investment and have thus caused a huge amount of trading in rupee and Nifty to go out of the country. Presently, global trading in rupee and Nifty takes place in Singapore and Dubai because they provide a sound regulatory framework with regard to financial regulations and taxation. This has an adverse effect on the Indian economy as it causes a drain on the revenue of the country. Establishing IFSC with sound regulatory framework would aid in bringing back the revenue stream to the country.



Further, only large Indian companies having international presence are able to attract global fund managers to invest in them and are able to go to London or New York to raise money. Various other Indian companies are unable to get noticed. Now, given the current scenario, when an IFSC will be set up in India, foreign entities working in it, will have access to many more Indian companies and will also get engaged in the Indian economy in a better way. Further, these entities will be able to invest in the equity and debt of a large number of Indian companies.



Moreover, when Indian companies raise equity and debt capital outside India, revenues pertaining to the financial services performed for these activities accrue in places where such capital was raised. Salary and tax with respect to the same are paid outside India. Therefore if entities set up in an IFSC, globally compete to provide these services, we would be able to prevent the above mentioned payments from going out of India.



The most important impact of setting up an IFSC is that it will be able to generate employment opportunities in the country. Branches or subsidiaries of stock exchanges, banks, clearing corporations and depository set up in an IFSC would definitely require work force to manage their operations, this in turn would create employment opportunities within the country.




Thursday, 07th Apr 2016, 11:15:01 AM

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