Abu Dhabi Investment Authority (ADIA), the largest sovereign wealth fund in the United Arab Emirates (UAE), is setting up a $4-5 billion fund to invest in India’s GIFT City through a tax-neutral finance hub in Prime Minister Narendra Modi’s home state of Gujarat, according to two sources with direct knowledge of the matter.
Approval from GIFT City
The regulatory authority for financial services at Gujarat International Finance Tec-City, or GIFT City, has granted in-principle approval to ADIA to set up the fund, sources said, declining to be identified as they are not authorised to speak to media.
ADIA’s intention to establish a presence in the hub was first announced last July in a joint statement by India and UAE. The amount of investment planned and the approval from the regulatory authority has not been previously reported.
A spokesperson for ADIA declined comment. An email to the International Financial Services Authority (IFSCA), which regulates financial services in the hub, was not answered.
First sovereign wealth fund in GIFT City
With the approval, ADIA will become the first sovereign wealth fund to begin investing in India via GIFT City. The greenlight comes days before Modi is set to visit Abu Dhabi to inaugurate a large temple.
Since becoming prime minister a decade ago, Modi has visited UAE six times, strengthening ties with India’s third-largest trading partner. Trade between India and the UAE totalled $85 billion for the financial year ending March 2023, according to Indian government data.
The Arab nation is host to one of the largest Indian diaspora populations in the world at 3.5 million, which constitute almost 35% of UAE’s total population.
“By the middle of this year, ADIA could start investing through this fund. The allocated funds would be invested in India over a period of time,” said the first of the two sources, without elaborating.
Investment opportunities
Funds which set up at GIFT City can invest in Indian and foreign equities and debt securities, among other assets.
Modi’s government has in recent months tried to boost activity at the GIFT City, including by allowing firms which are unlisted in India to list shares directly at exchanges there.
Finance Minister Nirmala Sitharaman, while announcing the federal budget this month, said the government aims to build up GIFT City as a “gateway for global capital and financial services for the economy’.
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