My Imaginary Dialogue with the FM asking for Amaravati as a Second GIFT City

I wrote about this last June when Andhra also became a part of GOI. Then it was just an emotional and intuitive ask. Now I have examined all the issues and developed the argument further and present my case in the form of an imaginary dialogue with the FM.

Why do we need another GIFT City?

FM: Why should India create a second city when the current GIFT City itself is still finding its feet?

Hari: Madam, GIFT City is currently a monopoly. We all know that monopolies stagnate, whereas competition brings more business, drive, and innovation. There are global precedents of multiple financial hubs. The United States has three financial hubs: New York/Wall Street for capital markets, Chicago for commodities, and Silicon Valley for venture capital. China too has Shanghai, Shenzhen, and Hong Kong. I would therefore argue that GIFT City will grow much faster if another one is developed at Amaravati.

What is the Regulatory Framework?

FM: Does the current legal framework allow for more than one GIFT City? I need to ask my colleagues, but have you examined it?

Hari: Yes Madam, I did. The laws are enabling and not at all restrictive. The SEZ Act, the Finance Act provisions, and IFSCA regulations nowhere prohibit multiple IFSCs. So you do not need to go to Parliament. A simple GO will suffice.

Won’t Other States Also Make Similar Demands?

FM: If we give this to Amaravati, won’t other states also demand the same?

Hari: This is a good point. One way to prevent such asks is to have the criterion that only greenfield cities qualify to become GIFT Cities. Frankly, I do not see other states having the capacity to acquire land and build a greenfield city from scratch. So we need not worry on that count.

What is so special about Amaravati?

FM: Even if it is legally possible, why should we choose Amaravati? What special advantages does it offer?

Hari: The Telugu diaspora. They are one of the largest, most successful Indian communities abroad. Telugus are natural leaders and have strong entrepreneurial genes. They, like me, have a strong emotional connection with Andhra and want to give back but are unable to do so. Announcing Amaravati as a GIFT City will energise them and bring much needed capital and development into the state.

Can GOI Afford It?

FM: We cannot afford another fiscal commitment.

Hari: Madam, tax incentives apply only if business is generated and are by nature performance linked. If there is no business as a result of this, then there is no burden. If there is business, the collateral positive effects will far outweigh the cost of tax incentives.

Conclusion

FM: Let me summarise your arguments.

A. Competition is good, as proven with global examples.

B. A criterion of only greenfield will prevent other states from asking.

C. The Telugu diaspora will play a role in building the city.

D. Fiscal incentives are linked to performance.

E. The current legal framework allows the permissions through a simple notification.

Hari: Yes, Madam you have summarised perfectly. This is not a parochial plea for Andhra. You can view it as an appeal for India. With one GIFT City in Gujarat and another in Andhra, we are making India as multi hub financial powerhouse.

FM: I appreciate your request. I will study this further and put it up to the PMO.

Hari: Thank you, Madam.

Hari’s Curries – A Buffet of Reflections