Focus: GSII International Relations
Why in news?
- The United Kingdom has entered into a strategic partnership to develop India’s fledgling international financial services centre GIFT city, and agreed to set up a new Fund of Funds to be managed by state bank of India group in order to route U.K.’s future capital investments into India.
- India and U.K. also signed off on a new infrastructure finance and policy partnership to help India execute its National Infrastructure Pipeline that envisages investments worth $ 1.4 trillion, at the tenth Economic and Financial Dialogue (EFD) between the two countries steered by U.K. Chancellor and Indian Finance minister.
- India is now the second-largest project investment source for the U.K.
- Under the infrastructure partnership, the UK will support India’s infrastructure pipeline by sharing experience, knowledge exchange and technical assistance to support India’s National Infrastructure Pipeline, including setting up a Project Preparation Support Facility-cum-Centre of Excellence for PPP Projects.
- To mobilise private capital for green investment, a new U.K.-India Sustainable Finance Forum is also being established.
- Welcoming India’s move to allow 100% tax exemptions for sovereign wealth funds investing in infrastructure, the U.K. Chancellor termed it a positive for their government’s development capital investments in India and the CDC Group.
India and the U.K. in the COVID-19 battle
To help combat the pandemic, U.K. and India announced a joint investment of £8 million for research to understand and address the factors leading to the severity of the coronavirus in South Asian populations in U.K. and in India.
Separately, the U.K. Department of Health and Social Care will contribute to India’s coronavirus Joint Response Plan (JRP) and antimicrobial resistance via the World Health Organization with an initial amount of £600,000, as per the joint statement.
What is GIFT City?
GIFT (Gujarat International Finance Tec-City), located in Gandhinagar is India’s first International Financial Services Centre.
International Financial Service Centre (IFSC)
- An IFSC caters to customers outside the jurisdiction of the domestic economy. Such centres deal with flows of finance, financial products and services across borders.
- An expert panel headed by former World Bank economist Percy Mistry submitted a report on making Mumbai an international financial centre in 2007. However, the global financial crisis in 2008 made countries including India cautious about rapidly opening up their financial sectors.
- In India, IFSC has been defined in Special Economic Zone (SEZ) Act, 2005.
- Since India has many restrictions on the financial sector, such as partial capital account convertibility, high SLR (statutory liquidity ratio) requirements and foreign investment restrictions, an SEZ can serve as a testing ground for financial sector reforms before they are rolled out in the entire nation.
- As per the SEZ Act the Central Government may approve the setting up of an International Financial Service Centre in a Special Economic Zone and may prescribe the requirements for setting up and operation of such centre. The Central Government shall approve only one International Financial Services Centre in a Special Economic Zone.
Special Economic Zone (SEZ)
- A special economic zone (SEZ) is an area in which the business and trade laws are different from the rest of the country.
- SEZs are located within a country’s national borders, and their aims include increased trade balance, employment, increased investment, job creation and effective administration.
- To encourage businesses to set up in the zone, financial policies are introduced.
- These policies typically encompass investing, taxation, trading, quotas, customs and labour regulations.
- Additionally, companies may be offered tax holidays, where upon establishing themselves in a zone, they are granted a period of lower taxation.
-Source: The Hindu