What is IFSC Authority Controversy?
On April 27, the Central Government drafted a notification stating that the IFSC Authority will be headquartered in Gandhinagar, Gujarat (the place where GIFT City is located) instead of Mumbai. This sparked off the controversy over the establishment of IFSC Authority as it was earlier proposed to be in the country's financial hub, Mumbai.
IFSC Authority Controversy
The present Maharashtra Government accused the then Devendra Fadnavis Government of killing the headquarters project by allocating a plot meant for IFSC Authority to bullet train terminus. However, the later clarified that the bullet train terminus was to be built underground and the IFSC Authority headquarters above the ground. Fadnavis further claimed that the headquarters project was put on the backburner as the newly formed state government (Maha Vikas Aghadi) did nothing to get it in Mumbai.
Sharad Pawar's letter to Prime Minister Modi
In light of this controversy, President of Nationalist Congress Party (NCP), Sharad Pawar, wrote a letter to Prime Minister Modi over the IFSC controversy stating the Centre's decision to move the headquarters of International Financial Service Centre (IFSC) to Gujarat from Mumbai as egregious, erroneous and unwarranted.
Pawar also urged the Central Government to reconsider its decision as it will create an unnecessary political disturbance. It will cause financial damage to the country and will also bring international discredit by undermining the importance of India's financial hub, Mumbai.
Pawar stated that Mumbai has been recognised as one of the worlds top 10 centres of commerce in terms of global financial flow, generating 6.1% of India's GDP and accounts for 25% of industrial output and 70% of capital transactions to the Indian economy.
The NCP President further stated that Mumbai houses important financial institutions and corporate headquarters of numerous companies and its business opportunities attract many multinational companies from all over the world. As Mumbai is India's economic, financial and commercial capital-- Pawar urged the Central Government to reconsider the decision to shift IFSC headquarters from Gujarat to Mumbai and relocate it on the merit basis.
In his letter to PM Modi, Pawar quoted the data from RBI (Reserve Bank of India) which stated that the Indian banking sector has deposits worth ₹145,00,000 crore. The share of Maharashtra state alone in the said deposits is 22%, followed by Delhi (10%), Uttar Pradesh (7.8%), Karnataka (7.2%) and Gujarat (5.4%). Through G-secs, the Centre receives funds worth ₹26,00,000 crore, of which ₹5,95,000 crore is received from Maharashtra as against Gujarat’s contribution of ₹1,40,000 crore.
On February 10, 2007, the then Finance Minister of India and the Chairman of The High Powered Expert Committee (HPEC), P. Chidambaram recommended that India must have an International Financial Services Centre (IFSC) which must be headquartered in Mumbai.
In 2007, the then Chief Minister of Gujarat, Narendra Modi in Gujarat Vibrant Summit announced to built a GIFT City (Gujarat International Finance Tech-City) near Gandhinagar in Gujarat. The GIFT City was India's first International Financial Services Centre (IFSC) and was set up through the SEZ (Special Economic Zone) Act of 2005.
International Financial Services Centre Authority Bill
On November 25, 2019, the International Financial Services Centre Authority Bill was introduced in the Lok Sabha to regulate the financial services market in the IFSC in India. The Bill was applicable to all the IFSCs set up through the SEZ Act, 2005. On December 11, 2019, the Bill was passed in the Lok Sabha and on Dec 12, 2019, the Bill was passed in the Rajya Sabha. However, nothing was stated in the Bill about the location of headquarters of the IFSC Authority.
Functions of the IFSC Authority
1- The IFSC Authority will regulate financial products, financial services and financial institutions-- previously approved by any of the appropriate regulators such as RBI, SEBI, IRDAI and PFRDA. The financial products include securities, deposits, contracts etc.
2- The IFSC Authority will also follow all the procedures applicable to the financial products, financial services and financial institutions under their respective laws.
3- The IFSC Authority will consist of 9 members and will be appointed by the Central Government. These are-- a chairperson; a member each from RBI, SEBI, IRDAI and PFRDA; two members from Ministry of Finance and two members on the recommendation of a Search Committee.
What is IFSC?
IFSC is the International Financial Services Centre which provides world-class financial services to the non-residents and residents. The financial service is provided in a currency other than the currency where the IFSC is located. For Example, IFSC located in India will provide currency to the people other than Indian rupee. It is worth noting that only the US has more than one IFSC in the world.
Congress spokesperson Sachin Sawant stated on the issue that PM Modi wants Gujarat ahead of all other states and that he does not look at all states equally. But, the Fadnavis government has also misled people for five years by claiming that an IFSC would be built in Mumbai.