The IFSCA Annual Report 2023-24 underscores both achievements and challenges in establishing GIFT IFSC as a global financial hub. While the decline in global investment flows highlights vulnerabilities, sectors like sustainable finance and commodity derivatives present significant growth opportunities. By implementing targeted strategies, GIFT IFSC can navigate global uncertainties and emerge as a resilient and innovative financial ecosystem.
A Critical Analysis of IFSCA Annual Report 2023-24
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New Delhi (ABC Live): The International
Financial Services Centres Authority (IFSCA) released Annual Report 2023-24 on
17/12/2024.
ABC Research Team analgised the
IFSCA annual report which outlines the progress and challenges faced by India’s
maiden financial hub, the Gujarat International Finance Tec-City (GIFT IFSC).
This ABC Report critically
examines the report, analysing key trends, challenges, and strategic
opportunities. It provides a data-driven exploration of the performance of
equity markets, commodity derivatives, fund management, and sustainable
finance, offering actionable insights for policymakers and stakeholders.
Introduction
The International Financial
Services Centres Authority (IFSCA), established in 2020, serves as a unified
regulator for India’s International Financial Services Centres (IFSCs). Its
vision is to position GIFT IFSC as a global hub for financial services, leveraging
state-of-the-art infrastructure, a progressive regulatory framework, and
strategic policy incentives. The IFSCA Annual Report 2023-24 highlights
achievements, sectoral performance, and emerging challenges amid global
economic uncertainties.
This research article delves into
the report’s key findings and offers recommendations for sustained growth.
Strengths: Quantitative
Highlights
1. Growth in Financial
Ecosystem
|
Metric |
FY 2022-23 |
FY 2023-24 |
Growth (%) |
|
Registered Fund Management
Entities (FMEs) |
48 |
59 |
22.92 |
|
Alternate Investment Funds
(AIFs) |
63 |
71 |
12.70 |
|
Insurance Offices (IIOs) |
5 |
6 |
20.00 |
These metrics indicate expanding
participation in GIFT IFSC’s financial ecosystem.
2. Focus on Sustainable
Finance
|
Indicator |
Value (USD Million) |
% Contribution to Total
Financing |
|
Sustainable Financing by IBUs |
$320.5 |
12% |
Weaknesses: Sectoral and
Financial Gaps
1. Decline in Investment Flows
|
Parameter |
2022 |
2023 |
Change (%) |
|
Global Investment Flows |
$3.5 Trillion |
$1.64 Trillion |
-53.14 |
|
Number of IPOs |
1,250 |
912 |
-27.12 |
- The decline reflects global economic challenges,
potentially impacting the attractiveness of IFSC as a global hub.
2. Limited Diversification in
Commodities
|
Commodity |
2022 Volume (Tonnes) |
2023 Volume (Tonnes) |
Change (%) |
|
Gold Demand |
4,699.4 |
4,467.9 |
-5.00 |
|
Silver Demand (Industrial) |
98.3 |
101.4 |
+3.15 |
Opportunities: Sectoral and
Regional Expansion
1. Emerging Regional Focus
|
Region |
Investment Growth FY
2023-24 |
% of Total Portfolio |
|
Asia-Pacific |
+12% |
34% |
|
Middle East |
+9% |
18% |
|
Africa |
+7% |
9% |
Leveraging growth in Asia-Pacific
and Middle Eastern markets aligns with GIFT IFSC’s goal to serve as a regional
hub.
2. Maritime Sector Expansion
|
Metric |
Value FY 2023-24 |
|
Bulk Carriers Leased |
15 |
|
Prominent Ship Lessors |
5 |
Threats: Comparative Analysis
1. Competition from Global
Financial Hubs
|
Financial Hub |
Ease of Doing Business Rank |
Global Financial Centre
Index Rank |
|
GIFT City IFSC |
63 |
46 |
|
Singapore |
2 |
5 |
|
Dubai |
10 |
22 |
2. Macroeconomic Risks
|
Indicator |
2023 Value |
Projected 2024 Value |
Change (%) |
|
Global GDP Growth |
3.1% |
3.2% |
+0.1 |
|
Global Inflation |
6.8% |
5.9% |
-13.24 |
Recommendations with KPIs
1. Performance Metrics
|
KPI |
Current Status |
Target for FY 2024-25 |
|
Number of Registered Entities |
250 |
300 |
|
Share of Sustainable Finance |
12% |
15% |
2. Strategic Focus Areas
|
Focus Area |
Priority Actions |
Measurable Outcomes |
|
Green Finance |
Introduce more ESG products |
+20% in ESG debt listings |
|
Maritime Leasing |
Attract more ship lessors |
+10% in shipping leases |
1. Performance Analysis
1.1 Equity Markets
Equity markets faced significant
challenges in 2023, with global investment flows declining sharply.
|
Metric |
2022 |
2023 |
Change (%) |
|
Global Investment Flows (USD
Trillion) |
3.5 |
1.64 |
-53.14 |
|
Number of IPOs |
1,250 |
912 |
-27.12 |
|
Equity Market Volume |
Stable Growth |
Declined |
-20.9 (value) |
Challenges: Investor
distrust, triggered by events like the Silicon Valley Bank crisis, and tight
monetary policies have stifled market confidence.
Opportunities:
- Streamlining direct listing norms at GIFT IFSC can
attract more IPOs.
- Offering tax incentives for equity listings to
boost participation.
1.2 Commodity Derivatives
Commodity derivatives emerged as
a bright spot, with increased trading volumes as investors sought risk
management tools amid geopolitical tensions.
|
Metric |
2022 |
2023 |
Change (%) |
|
Commodity Derivative Volume |
Moderate |
Increased |
+10 |
Opportunities: Expanding
commodity offerings and developing exclusive trade hubs can position GIFT IFSC
as a global leader in risk management services.
1.3 Fund Management
The global asset management
industry rebounded but faced challenges in net flow rates.
|
Metric |
2022 |
2023 |
Change (%) |
|
Global Assets Under Management
(AUM, USD Trillion) |
98 |
120 |
+22.45 |
|
Net Flow Rate |
1.6% |
1.6% |
Stable |
Challenges: Volatility in
equity and bond markets hindered fund inflows.
Opportunities:
- Promoting ESG-focused and alternative funds to
align with global investment trends.
- Leveraging FinTech innovations to offer
personalized investment products.
1.4 Sustainable Finance
Sustainable finance has shown
promising growth, contributing significantly to IBUs’ portfolios.
|
Metric |
Value (USD Million) |
Contribution (%) |
|
Sustainable Financing by IBUs |
320.5 |
12 |
Opportunities:
- Incentivizing ESG debt listings to establish GIFT
IFSC as a green finance hub.
- Collaborating with global ESG-focused institutions
to attract environmentally conscious investors.
2. Challenges and Risks
2.1 Key Challenges
|
Challenge |
Impact |
|
Investor Distrust |
Reduced participation in equity
markets |
|
Geopolitical Tensions |
Supply chain disruptions and
increased market volatility |
|
Competition from Global Hubs |
GIFT IFSC lags behind
established centers like Singapore and Dubai |
|
Regulatory Harmonization |
Misalignment with global best
practices affecting investor confidence |
2.2 Emerging Risks
|
Risk |
Description |
|
Inflation and Interest Rates |
Rising interest rates reducing
liquidity in financial markets |
|
Global Recession Threats |
Potential downturn in global
GDP growth affecting investments |
|
Technological Disruption |
Lag in adopting innovative
financial technologies |
3. Strategic Recommendations
|
Focus Area |
Action Plan |
Expected Outcome |
|
Equity Markets |
Streamline direct listing norms
and offer tax incentives |
Increased IPOs and global
participation |
|
Commodity Derivatives |
Expand offerings and establish
trade hubs |
Enhanced trading volumes and
investor base |
|
Fund Management |
Promote ESG and alternative
investments |
Boosted fund inflows and
diversity |
|
Sustainable Finance |
Enhance ESG product portfolio |
Establish GIFT IFSC as a green
finance hub |
|
Technology Adoption |
Introduce regulatory sandboxes
for FinTech firms |
Accelerated innovation and
competitiveness |
4. Conclusion
The IFSCA Annual Report
2023-24 underscores both achievements and challenges in establishing GIFT
IFSC as a global financial hub. While the decline in global investment flows
highlights vulnerabilities, sectors like sustainable finance and commodity
derivatives present significant growth opportunities. By implementing targeted
strategies, GIFT IFSC can navigate global uncertainties and emerge as a
resilient and innovative financial ecosystem.
References
- IFSCA Annual Report 2023-24
- World Economic Outlook, IMF (2024)
- Global Financial Stability Notes, BIS (2024)
- Gold and Silver Market Surveys, World Gold Council
and The Silver Institute (2024)
