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A raw GIFT, handle with care

Finally, after considerable endeavour in Gandhinagar Sachivalaya, I was able to lay my hands on what is being regarded as "feasibility study" of chief minister Narendra Modi's dream project, Gujarat International Finance Tec-city. It's called "Building a World-class Finance Centre in India: GIFT". It was handed over to me by a senior state bureaucrat, who told me it is a "rare document, not meant for circulation", hence I should return it after going through it.
Prepared by topnotch international consultants, McKinsey & Company, I tried to get it from several sources, including bureaucrats in the state urban development department, which is supposed to be responsible for the project. All of them promised that they would give me a copy, even directed those handling the special purpose vehicle, GIFT Company Ltd, set up for building the finance city, to "do the needful". I got a few phone calls from GIFT Company Ltd executives promising they would "look into the matter", but all in vain. After scanning through the study, I was convinced why there was so much reluctance all around. I found that a senior financial expert of Gujarat government was right when he told me during an informal talk – that GIFT is a "sheer waste of time, energy and money" if it is at all meant to be a financial city.
Being built next to river Sabarmati just about 10 kilometers away from Ahmedabad, Gujarat's business capital, GIFT is under implementation in partnership with Infrastructure Leasing & Financial Services (IL&FS). Two GIFT towers are almost ready, and an exhibition complex is being built by a body that has little to do with finance – India International Textile Machinery Exhibition Society, which claims to be a non-profit organization serving textile engineering industry and textile industry through international exhibitions. An organization which has booked office space in one of the two already constructed towers, too, has also little to do with finance. It is Gujarat Electricity Regulatory Commission (GERC), the state authority meant to regulate power tariff for various categories of consumers. All of this reminded me what Sam Pitroda, architect of telecom revolution in India, had said about GIFT during his visit to Gandhinagar in January 2011 – that the proposed finance city was in danger of turning into a real estate hub. My curiosity in getting the feasibility study only intensified. Meanwhile, Amitabh Bachchan has bought a piece of land next to GIFT, and many say, many top babus have followed suit.
The study was prepared in September 2007 and has been marked "confidential" for reasons better known to the state babudom. Its concluding remarks try to show big dreams – they say, financial services in India are "poised for dramatic growth over the next decade, creating close to 15 million jobs by 2020", and with the "right building blocks in place, GIFT, with its unique value proposition of world-class infrastructure at unmatched price points, can potentially evolve as a financial hub and capture a significant part of this opportunity".
It even suggests big business is poised to take on this opportunity, estimating, GIFT "could do" a business to the tune of 13 to 18 billion US dollars by 2020. And for this, the study offers lavish advise on what all the government should do to make GIFT feasible – systematically roll out "a comprehensive infrastructure plan"; offer investors competitive price for 80 million feet of office space; rapidly institute "enabling tax policies and regulations to attract key clients"; and put in place "single-window clearance system for clients" to "facilitate approvals."
However, on the most crucial factor of human resources, on which a finance city should be primarily based, the study shows up its doubts on GIFT transparently. It says, "Based on expected local talent supply projections, GIFT is likely to face a severe talent gap in the medium to long term." It underlines, "Gujarat faces a severe shortage of talent, with a shortfall in the number of higher educational institutions, low enrolment rates in English medium schools, and perceived reluctance on the part of senior management to relocate to Gujarat." Further: "Gujarat compares well with other Indian states on overall enrolment rates, it still lags behind on educational infrastructure compared to some of the leading states."
Fishing out statistics, it argues, Grade A institutes are particularly very few, adding, "Discussions with a few potential investors indicate that many senior mangers are reluctant to relocate to Gujarat." Then, it goes on to advise the government to work out a frantic strategy to overcome the problem.
In its "benchmarking exercise" for GIFT, too, the feasibility study ranks Ahmedabad in poor light compared to major Indian cities. Quoting a Government of India study prepared by Percy Mistry on making Mumbai an international financial city, the study says, in "attracting sustainable local economy", Ahmedabad's international ranking is a poor 0.6 on a scale of 10, compared to Mumbai's 4.7, Delhi's 2.8, Channai's 1.0, Kolkata's 1.6, Bangalore's 0.9 and Hyderabad's 0.9. Pune equals Ahmedabad. In "highly developed infrastructure", Ahmedabad ranks 2.7, compared to Mumbai's 4.7, Delhi's 3.7, Chennai's 3.8, Kokata's 3.2, Bangalore's 3.2, Hyderabad's 3.1 and Pune's 3.3. Only in "good quality of life", Ahmedabad's rank is 2.7, which is almost equal to Mumbai's 2.9, Bangalore's 2.9 and Delhi's 2.6, though worse than Chennai (3.8), Kolkata (3.8) and Hyberabad (3.0). In overall weightage, Ahmedabad ranks 1.8, which is worse than the seven other major Indian cities.
McKinsey's ranking doesn't differ much from Percy Mistry's. In conducive business environment, it ranks Delhi as best with 9.7 on a scale of 10, with Mumbai coming next with 7.2, Bangalore 5.3, Pune 4.0, Hyderabad 3.6 and Chennai 3.2. It offers Ahmedabad just 1.8 points. In Gross city domestic product, Ahmedabad's ranking of 2.4 is worse than Mumbai's 10, Delhi's 8.2, Kokata's 6.9, Chennai's 3.7 and Hyderabad's 2.9.
The situation is no different in number of suitable graduates and engineers every year, or telecommunications bandwidth, or power, or roads, or banking activities. Only for "cost of living" and "office space average rental rates", Ahmedabad ranks best with 10. For some inexplicable reason, the consultants do not analyze the rankings. They only say that "no Indian city compares strongly with existing and emerging international financial centres", claiming this is the reason why GIFT is "well-positioned to capture a significant portion of this opportunity."
Yet, it mentions "key threats" to GIFT. These come from Singapore, a "thriving capital market", and Dubai, which has a "very proactive regulatory authority with a do-what-it-takes attitude." It warns, "Given its proximity to Mumbai and the presence of large population of Indian origin, Dubai represents a major threat to GIFT."


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