UAE wealth fund plans $4-5 bn in investments via new finance hub in PM Modi's Gujarat: Report

Abu Dhabi Investment Authority (ADIA), the largest sovereign wealth fund in the United Arab Emirates (UAE), intends to establish a $4-5 billion fund to invest in India, according to a Reuters report, citing two sources familiar with the matter. The fund will operate through a tax-neutral finance hub located in Prime Minister Narendra Modi’s home state of Gujarat. The regulatory authority for financial services at Gujarat International Finance Tec-City (GIFT City) has granted ADIA in-principle approval to establish the fund, added the report, citing the sources. The announcement of ADIA’s intention to set up a presence in the hub was made last July in a joint statement by India and the UAE. The specific investment amount and the approval from the regulatory authority had not been previously disclosed. According to the report, spokesperson for ADIA declined to comment on the development. An email to the International Financial Services Authority (IFSCA), which regulates financial services in the hub, was not answered, the report added. ADIA’s approval marks a significant milestone as it becomes the inaugural sovereign wealth fund to venture into Indian investments through GIFT City. This green light coincides with PM Modi’s imminent visit to Abu Dhabi for the inauguration of a prominent temple. Since assuming office 10 years ago, PM Modi has visited the UAE on six occasions, strengthening relations with India’s third-largest trading partner. Trade figures between India and the UAE reached $85 billion for the fiscal year ending in March 2023, Reuters quoted Indian government statistics. The UAE boasts of one of the world’s largest Indian diaspora populations, numbering 3.5 million, constituting nearly 35% of the nation’s total inhabitants. According to one of the sources, ADIA is poised to commence investments through the fund by mid-year, with funds allocated gradually towards Indian ventures. GIFT City facilitates investments in both Indian and foreign equities, debt securities, and other assets. The Modi administration has recently endeavored to bolster activity within GIFT City, allowing unlisted Indian firms to directly list shares on its exchanges. Finance Minister Nirmala Sitharam highlighted the government’s ambition to position GIFT City as a premier hub for global capital and financial services during the budget announcement this month. The zone offers attractive incentives such as a ten-year tax holiday for companies, tax exemptions on overseas fund transfers, and proximity to Indian markets. ADIA and its subsidiaries have enjoyed exemptions from long-term capital gains taxes on Indian investments, a provision introduced in 2020 and effective until March 2025. Despite a slow start, fund management activities at the hub have gained momentum, with 95 local and global funds committing $30 billion and investing over $2.93 billion as of December 2023. “IFSCA is in early stages of discussions with other sovereign wealth funds to set up operations in GIFT City,” Reuters quoted the second source as saying. With inputs from agencies