India’s Potential in the Financial Services Sector

India’s financial sector has benefited immensely from the last 15 years of reforms. It has witnessed unprecedented growth across all products and segments in the last decade. There has been significant growth in retail banking products, driven by increased demand for basic banking, consumer finance products, and wealth management products. Capital markets have seen a big surge: the equity markets are at all-time highs; increasing numbers of corporates are raising capital to fund their expansion plans; PE firms are actively investing in India; FII inflows into the country have exceeded US$ 8 billion in 2006; and domestic asset management companies are gradually gaining importance. Today the sector is a significant contributor to India’s GDP. It employs over 3 million people, constitutes about 5% of the GDP and has an estimated market capitalization of over $ 200 billion.The IT/ITeS sector in India has also seen phenomenal growth. India has emerged as the top location of choice in the global IT/ITeS sector; it accounts for about 60% of the global offshore IT industry and about 50% of the global BPO market. Almost 40% of this IT/ITeS demand is driven by the banking and financial services sector. Going forward as the offshore and domestic markets continue to grow, we believe that India is very well positioned to capture a large portion of this opportunity.

As India sees continued economic growth, the financial sector is going to grow increasingly larger. By 2020, the sector could comprise a potential 10 million to 11 million jobs – both in the domestic and international financial services arena- and a GDP contribution of about US $350-400 billion with a $ 1.6-1.8 trillion market capitalization. Further, with continued growth and rapid development in technology, an increasing share of financial services opportunity will lend itself to centralization. As per McKinsey & Company’s estimates, by 2020, the sector is likely to offer a potential of about 6 million centralizable jobs across multiple service roles.

Strong Need for Establishment of Financial Services Center

Several countries around the world have successfully unlocked their financial services potential by establishing hubs, which over time have become international financial services centres (IFSC). These financial services centres help provide suitable regulatory regimes and create a business environment to promote talent and help increase capital flow. As these financial services centres develop, they create significant economic value for their domestic economies, e.g., leading financial services centres such as London and New York account for as much as 10% of the total GDP and about 5% of jobs. Moreover, emerging financial services centres such as Singapore and Hong Kong have also been able to achieve similar levels of concentration of economic activity over short periods of time.

While India has enormous potential in financial services as described above, it is currently not in a position to fully realise it. All leading Indian cities are far from measuring up to benchmarks set by successful international financial services centres. They severely lag behind on the quality of infrastructure, are not able to offer the required quality of life, and more importantly are constrained by regulations.

If India is to effectively unlock its financial services potential it would need unrestricted access to globally benchmarked financial services centres, which match international standards in infrastructure, attract quality talent, offer a high quality of life and are supported by a strong regulatory environment.

GIFT’s Positioning

GIFT aspires to catalyse India’s large financial services potential by offering to global and local financial services firms world-class infrastructure to tap the opportunity and best-in-class quality of life to attract top talent in the country. Like all leading financial centres GIFT will target a 6-8% share of the financial services potential in India. This would result in creation of ~ 500,000 direct and an equal no. of indirect jobs requiring upto 91 million square feet of real estate office and residential space. The proposition targeted by GIFT is compelling and will comprise of the following aspects:

	Robust Urban Planning:
	Narmada Main canal Unique building skyline of its kind in the region; Concept of Self -Sustainable City
	Infrastructure Provision
	Transportation system; District Cooling System; Domestic Gas Network; Captive power plant and Riverfront
	Integrated with a Technology Backbone for a tech-finance hub:
	Data Centers; Shared Infrastructure; Highly secure; Future-proof and Scalable
	Energy Conservation Measures: Reduced per capita energy consumption
	Comprehensive Water management plan incorporated to achieve self-sustainability
	Integrated township bestowed with the best of social and physical infrastructure.
	Proactive talent management to produce industry-ready graduates across various job profiles, by partnering with government, universities, industry associations and finishing schools

Vision

The Project has been globally benchmarked with International Financial Centres. GIFT also envisages to become a hub for IT/ ITES for Financial Services and other multi services sector. GIFT is expected to generate around 0.5 million of direct jobs and equal number of indirect jobs. While integrating their best features, GIFT also envisages creating high-quality city environment with best in class infrastructure. The Project thus, would set standards for Sustainable Business Environment.

Objectives

The vision of GIFT is to be achieved through the following objectives, which are enumerated as follows:

Propelled by a competitive economy anchored on commerce and related industry, GIFT, envisaged to be developed as an Eco-City, will serve as a Vibrant Hub and as a habitat showcasing family oriented, environmentally-sensitive growth with equity.

Target Business Segments

The various business segments that are proposed to be targeted by GIFT and nature of opportunities in each of these business segments are enumerated as follows:

	To develop a road map for fast track implementation
	To develop a new format for globally benchmarked Integrated City;
	To aggressively target all the financial services opportunity types suitable for centralization, ranging from back office operations and IT support to high end jobs in evolved product markets like trading, private banking etc.
	To make the city hugely scalable in each and every aspect for a distant future and create a much larger carrying capacity;
	To derive the city format from fast changing lifestyles and new technologies;
	To achieve an image of Global city, that keeps pace with modern technologies