In a groundbreaking move poised to bolster economic ties between the United Arab Emirates (UAE) and India, the Abu Dhabi Investment Authority (ADIA), the UAE’s largest sovereign wealth fund, is forging ahead with plans to initiate a substantial investment in India. ADIA is preparing to channel between $4 to $5 billion into the Indian market via a tax-neutral finance hub situated in Prime Minister Narendra Modi’s home state of Gujarat, sources with direct knowledge of the matter revealed.
The regulatory authority overseeing financial services at Gujarat International Finance Tec-City (GIFT City) has given in-principle approval to ADIA to establish the fund, marking a pivotal development in the realm of cross-border investment between the two nations. This strategic move by ADIA represents a significant step forward, positioning it as the first sovereign wealth fund to embark on investments in India through GIFT City.
The announcement comes just days before Prime Minister Modi’s scheduled visit to Abu Dhabi to inaugurate a grand temple, underscoring the growing strength of bilateral relations between India and the UAE. Over the past decade, Modi has made six visits to the UAE, solidifying ties with India’s third-largest trading partner.
The economic exchange between India and the UAE has been robust, with trade volumes reaching $85 billion for the financial year ending March 2023. Furthermore, the UAE is home to one of the largest Indian diaspora populations globally, comprising approximately 3.5 million individuals, accounting for nearly 35% of the UAE’s total population.
According to insiders familiar with the matter, ADIA could commence investment activities through the fund as early as the middle of this year, injecting capital into various sectors of the Indian economy over time. Funds operating within GIFT City enjoy the flexibility to invest in a diverse range of assets, including Indian and foreign equities, as well as debt securities.
The Indian government, led by Prime Minister Modi, has been actively promoting GIFT City as a premier financial services hub, offering attractive incentives such as a 10-year tax holiday for companies establishing a presence there and facilitating seamless fund transfers from overseas jurisdictions. Finance Minister Nirmala Sitharaman, in her recent budget announcement, reiterated the government’s commitment to position GIFT City as a global financial gateway for the Indian economy.
ADIA’s investment initiative is poised to inject fresh momentum into the Indian financial landscape, signaling confidence in India’s economic prospects and underscoring its attractiveness as a preferred investment destination. As discussions continue to unfold, stakeholders anticipate a surge in investment activity within GIFT City, further solidifying its position as a leading financial hub in the region.