Centre Rejects Proposal for International Financial Centre in Chandigarh
The Union ministry of finance has turned down the proposal to establish an International Financial Centre (IFC) in Chandigarh, modelled on the Gujarat International Finance Tec-City (GIFT City). This decision is a significant setback for the region, which was hoping to bolster its economy and elevate India’s position as a global financial powerhouse.
Background of the Proposal
Local member of Parliament Manish Tewari had written a letter to Union finance minister Nirmala Sitharaman in December last year, proposing the establishment of an IFC in Chandigarh. Tewari had pointed out that Chandigarh’s geographic positioning as the shared capital of Punjab and Haryana, coupled with its proximity to Himachal Pradesh, placed it at the heart of north India’s economic matrix.
During his Independence Day speech, Punjab governor and UT administrator Gulab Chand Kataria had also announced the proposal to set up the centre in Chandigarh. Following this, the UT administration initiated steps to establish the proposed ‘Chandigarh International Finance-Tec City’ in Industrial Area, Phase 3, spread over nearly 153 acres.
Reasons for Rejection
The Union ministry of finance cited the Special Economic Zones (SEZ) Act, 2005, which provides that the central government may approve the setting up of an IFSC in a SEZ and prescribe the requirements for setting up and operation of such a centre. The ministry stated that GIFT SEZ Ltd was the first entity to apply and receive a licence for setting up of an IFSC and it received the licence in 2011.
The ministry also stated that globally, one can find only one international financial centre in a country, and this is done to maximise efficiency gains and for optimum utilisation of resources. The reason for this strategy is that the mainland activities are not affected by the offshore activities, providing an easy mechanism for the regulator to monitor one location and keep upgrading regulatory infrastructure at the said location.
Implications of the Decision
The rejection of the proposal is a significant setback for the region, which was hoping to attract investments and create jobs. The UT administration had already initiated work on the centre, and the deputy commissioner and industries secretary Nishant Kumar Yadav had recently attended a NITI Aayog event, where he shared that preparations were underway to appoint a consultant to conduct a feasibility study of potential sectors, benchmarking of the GIFT City model, regulatory and infrastructure gap assessment, and Master planning and preparation of the detailed project report (DPR).
Tewari on Sunday said that the Punjab governor must speak to the finance minister first as to whether the Union government has any appetite for another GIFT City or not. He also stated that the Parliamentary Standing Committee of Finance, of which he is a member, would be reviewing the functioning of GIFT City in Mumbai on September 2.
Conclusion
The rejection of the proposal for an International Financial Centre in Chandigarh is a significant development that will have far-reaching implications for the region’s economy. While the decision is a setback, it is essential to understand the reasons behind it and the implications for the region’s economic development.
As the Indian economy continues to grow and evolve, it is crucial to have a robust and efficient financial system in place. The development of international financial centres is a critical component of this system, and it is essential to ensure that these centres are established and operated in a manner that maximises efficiency gains and optimises resource utilisation.
In the coming months, it will be interesting to see how the UT administration and the Union government work together to promote the region’s economic development and attract investments. The development of the Chandigarh International Finance-Tec City, although rejected, has highlighted the need for a coordinated approach to economic development and the importance of having a robust and efficient financial system in place.
Related News
For more information on the Indian economy and financial news, please visit our Indian Economy page. You can also read our article on GIFT City to learn more about the development of international financial centres in India.
