Trends in indian capital markets

2.68 Despite heightened geopolitical risks, rising interest rates and

volatile commodity prices, Indian capital markets have been one of the
best performing among emerging markets in FY24, reflecting India’s bright
economic stature. Capital markets are becoming prominent in India’s
growth story, with an expanding share in capital formation and investment
landscape on the back of technology, innovation, and digitisation. The
following sections present the significant trends in primary markets,
secondary markets, and institutional investment in India.
Primary Markets
2.69 Amid healthy domestic economic performance and a favourable
investment climate, primary markets remained robust during FY24,
facilitating capital formation of ₹10.9 lakh crore (which approximates 29
per cent of the gross fixed capital formation of private and public
corporates during FY23), compared to ₹9.3 lakh crore in FY23. Of the total
amount mobilised in FY24, 78.8 per cent was raised through debt
issuances. Fund mobilisation through all three modes, viz., equity, debt,
and hybrid, increased by 24.9 per cent, 12.1 per cent and 513.6 per cent,
respectively, in FY24 compared to the previous year.
2.70 The number of initial public offers (IPOs) increased by 66 per cent in
FY24 from 164 in FY23 to 272 in FY24, while the amount raised grew by 24
per cent (from ₹54,773 crore in FY23 to ₹67,995 crore in FY24). SME
platforms at the exchanges witnessed heightened activities during FY24
as the number of IPOs/FPOs (Follow-on Public Offers) of SMEs increased by
1.6 times (from 125 in FY23 to 196 in FY24), while the corresponding fund
raised rose by more than two and half times over the previous year (from
₹2,333 crore in FY23 to ₹6,095 crore in FY24). As per E&Y Global IPO
trends report, Indian exchanges were global leaders in IPO listings. India’s
share consistently rose to 17 per cent in 2023 from 6 per cent and 11 per
cent in 2021 and 2022, respectively.46 Reflecting the buoyant market
conditions, Qualified Institutional Placements (QIPs)47 emerged as a
critical equity fundraising mechanism for the corporates during FY24.
Resource mobilisation through rights issues more than doubled to ₹15,110
crore during FY24, compared to ₹6,751 crore in the previous year.
Public debt issuances
2.71 The corporate debt market in India is going from strength to
strength. During FY24, the value of corporate bond issuances increased to
₹8.6 lakh crore from ₹7.6 lakh crore during the previous financial year. The
number of corporate bonds public issues in FY24 was the highest for any
financial year so far, with the amount raised (₹19,167 crore) at a four-year
high. Private placements remained the preferred channel for corporates,
accounting for 97.8 per cent of total resources mobilised through the bond
market. Increasing investor demand and the rise in
46. 46
E&YPressReleaseon‘Indianstockexchangesrankfirstintheworldinterms
ofthenumberofIPOsin2023’dated19February 2024,
https://shorturl.at/Lj6Z3
47. 47 QIP was introduced by SEBI in 2006, under which Indian
listed companies can raise funds by issuing equity shares, fully or
 partially convertible debentures, or any other securities as
mentioned under the notification by SEBI in this regard. Listed
companies can raise capital without meeting the legal requirements
like submitting the pre-issue filings to SEBI.

63

Economic Survey 2023-24

the cost of borrowing from banks have made these markets more
attractive for corporates for funding requirements. The quantum of
outstanding corporate bonds increased by 5.5 per cent YoY to ₹45 lakh
crore (i.e., 15.5 per cent of GDP) at the end of March 2024.
REITs and InvITs
2.72 During FY24, ₹39,024 crore was raised by Real Estate Investment
Trusts (REITs) and Infrastructure Investment Trusts (InvITs), more than five
times compared to FY23, supported by the Government's thrust on
infrastructure development.
Secondary Markets
India among the best-performing markets
2.73 After enduring a highly turbulent global environment in FY23, global
stock markets recovered and performed well during FY24. All the major
markets, except China and Hong Kong, delivered better returns during the
period compared to the previous year. Indian stock market was among the
best-performing markets, with India’s Nifty 50 index ascending by 26.8
per cent during FY24, as against (-)8.2 per cent during FY23. FY24 saw
stellar performances from the US, Brazilian and Japanese markets among
the global markets. There was evidence of an AI-led tech stock surge, with
the tech-heavy US Nasdaq index rising by 34 per cent during FY24 after
delivering heavy losses in FY23.
Chart II.13: Remarkable performance of the Indian Stock Market
Source: Refinitiv for Index Values
2.74 The exemplary performance of the Indian stock market compared to
the world and emerging markets over the years can be primarily
attributed to India’s resilience to global geo-political and economic shocks,
its solid and stable domestic macroeconomic outlook, and the strength of
the domestic investor base. Mirroring the positive outlook on Indian
markets, India’s weight in the MSCI-EM index has increased to 17.7 per
cent at the end of FY24 from 13.7 per cent at the end of April 23, the
second-highest share among the EMs in the index.
64
40 30 20 10
0 -10 -20 -30
-8.2

Nasdaq, USA
Ibovespa, Brazil
Nifty 50
Nikkei, Japan
MSCI, World
TAIEX, Taiwan
Dow Jones, USA
DAX, Germany
CAC, France
KOSPI, Korea
FTSE 100, UK
MSCI EM
MSCI BIC
Straits Times,
Singapore
FTSE, South Africa
Shanghai Composite,
China
Hang Seng, Hong Kong
26.8
FY23 FY24
Return

Monetary Management and Financial Intermediation

2.75 The market capitalisation of the Indian stock market has seen a
remarkable surge over the years. Significant interest from domestic and
global investors in the Indian stock market as an attractive investment
destination and sustained IPO activity placed the Indian market fifth in the
world by market capitalisation in FY24. India’s market capitalisation to
GDP ratio has improved significantly over the last five years to 124 per
cent in FY24, compared to 77 per cent in FY19, far higher than that of
other emerging market economies like China and Brazil. It is essential to
strike a note of caution. The market capitalisation to GDP ratio is not
necessarily a sign of economic advancement or sophistication. Financial
assets are claims on real goods and services. If equity market claims on
the real economy are excessively high, it is a harbinger of market
instability rather than market resilience.
2.76 The value traded increased across all segments in the exchanges,
except currency derivatives during FY24, with increased investors'
participation and positive market trends. Commodity derivatives turnover
rose by 87 per cent in FY24, driven by an increase in turnover of options
contracts of the energy segment.
Table II.5: Market capitalisation to GDP ratios across countries
(percentage)
Indi Chin Braz Japa South United United
a a il n Korea Kingdom States
Dec-19 77 60
Dec-20 95 79
Dec-21 113 80
Dec-22 105 65
Dec-23 124 61
65 121 89
68 129 122
50 136 127
42 126 96
44 147 114
106 159
92 197
108 208
91 158
71 179

Note: *GDP figures are taken from the World Federation of Exchanges
(WFE), and market capitalisation is calculated as the sum of the market
capitalisation of NASDAQ and NYSE
Source: CEIC Database, World Bank, WFE
2.77 Box II.3 discusses the initiatives undertaken to strengthen the capital
markets through the use of technology, which have played a significant
role in enhancing their performance and efficiency.
Box II.3: The synergy of technology and Indian capital markets:
Driving growth and efficiency
Indian capital markets have witnessed a broad-based expansion across
various sub-markets, with the country's equity market capitalisation
reaching ₹415 lakh crore (USD 5 trillion) in May 2024, placing it fifth in the
global rankings.
The proliferation of technology has been a critical catalyst in transforming
economies worldwide, and the Indian capital markets have been no
exception. The sector has continuously transformed over the past few
years, leveraging technological advancements to facilitate growth and
efficiency.
65

Economic Survey 2023-24

Technology plays a role in meeting the market regulator SEBI's three
goals: market regulation, investor protection, and market development.
Individual investors today are over 9.5 crore and have nearly 10 per cent
direct ownership of the market through its almost 2500 listed companies.
This translates to around ₹36 lakh crore of wealth as of March 2024, apart
from indirect ownership in equity mutual funds that have ₹28 lakh crore in
assets under management (AuM). In this manner, technology allows
exchanges to help allocate capital to firms and millions of market
investors to invest in companies they have never visited and participate
in their long-term success and wealth creation. Overall, the market
capitalisation in India has risen by over 100 times in the last three
decades.
Technological advancements such as India Stack and regulatory measures
have fuelled an unprecedented surge in retail investor participation and
activity. The prevalence and proliferation of user-friendly trading apps,
mobile-friendly educational resources, and
financial market guidance have democratised access to the capital
markets.48 The seamless use of technology has empowered investors to
open trading and demat accounts online within minutes, trade from the
comfort of their homes, access investment reports, and raise queries
online efficiently. Initiatives such as the SEBI Complaints Redress System
(SCORES), a platform for investor grievance resolution, and Securities
Market Trainers (SMARTs) a program for investor education, have been
instrumental in safeguarding the interests of market participants,
particularly first-time investors.
Technology has also played a crucial role in market development. India's
unique digital architecture has imbued the capital market regulator with
the confidence to switch to the "T+1 settlement regime” comfortably, a
feat followed by very few countries worldwide.49 The introduction of
“Interoperability” among clearing corporations (CCs) created a one- to-
many relationship between stock exchanges and CCs that reduced
trading costs via better margin utilisation and capital resources of the
participants.50 Indian capital markets have also adopted on a pilot basis
the “Application Supported by Blocked Account” facility in the secondary
market, which allows investors to block funds in their bank until trade
confirmation. A recent initiative of the National Securities Depository
Limited (NSDL) titled NSDL-CAS has further eased the investors' lives by
presenting an aggregated view of assets held in demat format across
multiple accounts and mutual fund folios.51
Beyond growth, investor safety, and market development, business
continuity today has become a critical aspect of capital markets. Initiated
in 2022, the “Disaster Recovery (DR)

48 Explained: What's driving increased retail participation in the Indian

stock market? Livemint (2024), link available at: https://
tinyurl.com/3xetmuvt
49 Indian equity markets have even transitioned to same-day settlement
cycles ("T+0") in a limited manner, becoming the first nation to do so. The
transition to shorter settlement cycles has increased efficiency and
reduced settlement risk.
50 Interoperability among clearing corporations, PWC (2019)
51 Enhancing Investor Centric Services through Technology and
Education, AIBI Summit (2022)
66

Monetary Management and Financial Intermediation

45” framework allows the continuation of trading using existing
connectivity parameters in case of unforeseen events with minimal
switching time.52 In consultation with SEBI, stock exchanges and brokers
have implemented various measures to address technical glitches in
stockbrokers' electronic trading systems, such as the "LAMA (Log Analytics
and Monitoring Application) reporting" API, a monitoring platform to
overview the IT structure and perform analytics thereof.53 Additionally,
clearing corporations like NSCCL and ICCL54 have worked on two-way
portability to be operated as a "SaaS" (Software as a Service) model to
manage unforeseen software failures.55
While the synergy of technology and capital markets has unlocked
significant benefits, evolving challenges must be addressed. Privacy
concerns, cybersecurity risks, and the rising digital divide in the
population are some issues that require attention. Nonetheless, regulators
have been steadfast in their approach, realising that unlocking the
maximum potential from the marriage of technology and capital markets
is essential for the overall growth and development of the Indian economy.
Retail Participation in the Capital Market
2.78 The Indian capital markets have seen a surge in retail activity
through direct (trading in markets through their accounts) and indirect
(through mutual funds) channels in the last few years. The individual
investor's share in the equity cash segment turnover was at 35.9 per cent
in FY24. The number of demat accounts with both depositories rose from
1,145 lakh in FY23 to 1,514 lakh in FY24. The impact of this influx of
individual investors in the market is also reflected in new investor
registrations with the exchanges, their share in total traded value, net
investments, and ownership in the listed companies. For instance, the
registered investor base at NSE has nearly tripled from March 2020 to
March 2024 to 9.2 crore as of 31 March 2024, potentially translating into
20 per cent of the Indian households now channelling their household
savings into financial markets.
Mutual Funds (MFs): Accelerating the financial savings and retail
participation in capital markets
2.79 A rise in retail participation was more substantial and steadier
through the indirect channel via mutual funds. FY24 has been a
spectacular year for MFs as their AuM of the MFs increased by ₹14 lakh
crore (YoY growth of 35 per cent) to ₹53.4 lakh crore at the end of FY24,
boosted by mark-to-market (MTM) gains and expansion of the industry.
The total number of folios increased from 14.6 crore at the end of FY23 to
17.8 crore at the end of FY24. Barring income/debt-oriented schemes, all
categories of MF schemes witnessed net inflows. Inflows into
growth/equity-oriented and hybrid schemes accounted for more than 90
per cent of net
52 https://www.nseindia.com/trade/disaster-recovery-faqs
53 LAMA reporting: Failure is not an option, ITRS Blog (2023),
https://www.itrsgroup.com/blog/new-year-operational-risk 54 National
Securities Clearing Corporation Limited; Indian Clearing Corporation
Limited
55 NSE Clearing Archives dated 29 March, 2023,
https://archives.nseindia.com/content/circulars/COM56205.pdf

67

Economic Survey 2023-24

inflows into MFs. Among the passive schemes, exchange-traded funds
(ETFs) (other than gold exchange-traded funds) witnessed a 37 per cent
rise in net assets in FY24.
2.80 The MF segment presently has about 8.4 crore systematic
investment plan (SIP) accounts56 through which investors regularly invest
in schemes. Annual net SIP flows have doubled in the last three years,
from ₹0.96 lakh crore in FY21 to ₹2 lakh crore in FY24. Total SIP AuM is
approximately 35 per cent of the AuM of the MF industry for equity-
oriented schemes. This has pushed up ownership of MFs in Indian equities
to 9.2 per cent as of 31 December 2023, compared to 7.7 per cent as of
31 December 2021.
5.8
6.3 5.2
2
Chart II.14: SIP investment on a rising trajectory

10.7 6.8
8.3

1.2
1.6

FY22 FY23 FY24

SIP AUM (₹ lakh crore)
FY22 FY23 FY24
SIP Contribution (₹ lakh crore)
FY22 FY23 FY24
No. of SIP Accounts (crore)
Note: Outstanding SIP accounts and SIP AuM are reported at the end of
each financial year. SIP contribution pertains to yearly gross contribution
through SIP accounts.
Source: Association of Mutual Funds in India (AMFI)

2.81 Some of the factors that facilitated the entry of investors in the
pandemic period and beyond included seamless technological integration,
Government measures towards financial inclusion, growth of digital
infrastructure, rapid smartphone penetration, a rise of low-cost
brokerages, the pursuit of generating income from alternative sources and
lower returns generated by traditional asset classes such as real estate
and gold. However, retail investors have cashed in their gains in financial
markets and been investing in real assets. It is smart portfolio
diversification. A conducive economic environment in the form of lower
interest rates, sustained post-COVID-19 recovery, elevated inflation, and a
supportive policy backdrop also boosted the retail accumulation of capital
market assets. Further, continuous investor awareness programs focusing
on the rights and responsibilities of investors have contributed to the
continuing growth of individual participation in securities markets. In
August 2023, SEBI introduced the Online Dispute Resolution, which
combines online conciliation and online arbitration to resolve disputes
arising in the securities market. Another significant measure introduced in
FY24 was the centralised mechanism for reporting and verification in case
of demise of an investor, thereby smoothening the transmission process
to the legal heirs. Enhanced Investor
56 A SIP is a systematic approach to investing in mutual funds that
involves allocating a small pre-determined amount of money for
investment in the market at regular intervals.

68

Monetary Management and Financial Intermediation

Protection Fund57 and Settlement Guarantee Fund58 and shortening of
the settlement cycle have improved the perception of safety and security
in the Indian markets. Nonetheless, it is essential to ensure that retail
investors do not mistake these funds as mechanisms to underwrite their
losses and provide a backstop.
2.82 The number of unique tax IDs registered on the NSE rose from 2.7
crore in FY19 to 9.2 crore in FY24. The enhanced participation of retail
investors in the Indian capital market is hugely welcome and lends
stability to the capital market. It has also enabled retail investors to earn
higher returns on their savings. Most of the new retail investors are likely
young and may have a higher risk appetite. It is also reflected in the
interest that retail investors have shown in derivatives trading, especially
expiration-day trading. While derivatives are hedging instruments, they
are mostly used as speculative instruments by investors worldwide. India
is likely no exception.
2.83 Derivatives trading holds the potential for outsized gains. Thus, it
caters to humans' gambling instincts and can augment income if
profitable. These considerations are likely driving active retail participation
in derivatives trading. However, globally, derivatives trading loses money
for the investors, for the most part. Raising investor awareness and
continuous financial education is essential to warn them of the low or
negative expected returns from derivatives trading. A significant stock
correction could see losses that are more considerable for retail investors
participating in capital markets through derivatives. Investors’ behavioural
response would be to feel ‘cheated’ by unseen more considerable forces.
They may not return to capital markets for a long time. That is a loss to
them and the economy.
2.84 The financialisation of economies has not ended well, even for
advanced economies. The global financial crisis of 2008 is an obvious
example. Developing countries face debilitating crises when financial
market ‘innovations’ and growth run ahead of economic growth. The Asian
crisis of 1997-98 set back the high-flying economies of the region for a
long time. Therefore, India needs to have an orderly and gradual evolution
of the financial market.59
2.85 All stakeholders – market participants, market infrastructure
institutions, regulators, and the Government must ensure that capital
markets play their theoretically assigned role of directing savings to their
most productive investments. It is not just in the national interest. It is an
act of self-interest, too.
Social Stock Exchanges: Leveraging finance from a social stand-
point
2.86 Box II.4 discusses the role of the Social Stock Exchange (SSE) in
bridging the financing gap by providing alternative fund-raising
instruments for achieving socio-development goals.
57. 57 The Investor Protection Fund compensates the investors to
the extent of funds found insufficient in the defaulters' account to
meet the admitted value of the claim, subject to a maximum limit of
₹25 lakh per investor per defaulter/expelled member in respect of
claims arising on expulsion/declaration of default of members.
58. 58 The objective of the Settlement Guarantee Fund is to
guarantee the settlement of all transactions of the members of the
exchange inter-se through the stock exchange.
59 For further details, please see: Nageswaran, V. & Natarajan, Gulzar.
(2019), ‘The Rise of Finance: Causes, Consequences and Cures’.
Cambridge University Press.

69

Economic Survey 2023-24

Box II.4: Social Stock Exchanges in India: Making progress
Indian securities markets, over the years, have been characterised by
momentous strides in expanding the retail footprint in finance, innovative
fund-raising, and regulatory solid scrutiny of stock exchange platforms. To
leverage this transparency and rigour of equity markets for social good, in
the Union Budget of FY20, the Government proposed to initiate steps
towards creating a SSE under the regulatory ambit of SEBI for listing
social enterprises and voluntary organisations working for the realisation
of a social welfare objective so that they can raise capital as equity as
well as, debt in the country.
Need for Social Stock Exchange: The SSE aims to bridge the financing gap
by providing alternative fund-raising instruments for achieving socio-
development goals. SSE is a separate segment of the existing stock
exchange, which can help social enterprises like non-
profit organisations (NPOs) and non-government organisations (NGOs)
raise funds from the public through the stock exchange mechanism. In
this way, SSE is expected to stimulate the ecosystem of outcome-driven
philanthropy in India in a transparent and regulated environment. SSE
also offers a platform for constructive engagement of NGOs and other
enterprises working in the area of social projects related to health,
education, livelihood generation, etc., to directly raise funds from the
private sector, corporate entities and individuals (including High Net
Worth Individuals (HNIs)) and contribute to development goals. With the
increasing global appetite for socially responsible investments, SSE
bridges this gap and brings the capital markets closer to the masses for
meeting various social welfare objectives.
Operationalisation of SSEs: The contributions towards the social sector
projects listed on SSE are made through a unique security, known as Zero
Coupon, Zero Principal (ZCZP) instrument as the nature of funding is akin
to a donation and, as such, does not promise any payment of coupon or
return of the principal amount. To scale up this ecosystem, the
Government has recently extended tax exemption under section 80G of
the Income Tax Act, 1961, to the contributions made through ZCZPs on
SSE. Another noteworthy feature of
SSE is that fund-raising on this platform is tied to specific projects
undertaken by eligible NPOs. These NPOs are mandated to declare their
year-wise milestones that are targeted to be achieved with funds raised
from the public. In this regard, the SEBI (Issue of Capital and Disclosure
Requirements (ICDR)) Regulations, 2018 identifies broad activities for
which these potential projects can be undertaken, in areas such as
eradication of hunger, poverty, malnutrition, and inequality; promotion of
healthcare, education, livelihood for rural and urban poor; disaster
management; and environmental sustainability, among others.
To be listed on SSE, NGOs/NPOs must disclose their past social audit
reports, verifying proven expertise and commitment to executing social
sector projects. As eligibility criteria, the regulatory framework requires
that the NGOs/NPOs have at least 3 years of field experience in executing
social sector projects. Further, to ensure accountability of fund-
70

Monetary Management and Financial Intermediation

raisers to fund-providers, entities raising funds on SEE must disclose
detailed information about their social and environmental performance in
an Annual Impact Report within 90 days from the end of the financial year,
duly audited by a social auditor.60 Thus, through its rigour, transparency,
and scrutiny, the SSE platform ensures that donations reach credible
entities, inspiring confidence in the ecosystem and paving the way for its
scalability as we advance.
Progress so far: After the rollout of the regulatory framework for SSE by
SEBI, National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)
obtained SEBI's in-principal approval to set up a separate segment of SSE.
As of April 2024, 51 NPOs are registered on the BSE, and 50 (11
undergoing renewal) are registered on the NSE. Nine NPOs have raised
funds on SSE, amounting to a total of ₹ 12.4 crore. These projects span
social projects in education, livelihood generation, skill development,
etc.61
Gift IFSC: emerging as a dominant gateway for global capital
inflows into india
2.87 The IFSC in GIFT City, Gujarat, is envisaged to be a unique
international financial jurisdiction located inside onshore India, set up with
a dual objective of onshoring India- centric international financial services
business as well as serving as a preferred gateway for channelising global
capital flows into and out of the country. Over the last few years, GIFT IFSC
has made great strides in achieving both of these objectives. The initiative
is a shining example of India’s firm commitment to undertake deep, bold
and ambitious financial sector reforms to attract the global financial
services business and gradually become a global leader in international
finance.
2.88 The uniqueness of the IFSC as a distinct financial jurisdiction
emanates from three fundamental factors. First, the IFSC has been
designated as a non-resident zone under the Foreign Exchange
Management Act, which means that entities set up in the IFSC are outside
the capital control restrictions and, therefore, can conduct business in any
of the eleven notified foreign currencies.62 Second, the IFSC has been
brought under the regulatory purview of a dedicated and unified financial
regulator, i.e. IFSCA (International Financial Services Centres Authority),
which has been set up under an Act of Parliament. This regulatory
intervention by the Government has significantly bolstered the
attractiveness of IFSC among global investors and financial institutions, as
they now have to deal with only one Authority for all approvals and
licenses. Third, through successive Union Budgets, the Government has
provided a separate tax regime for the IFSC, which is at par with what is
available in other leading global financial centres. The competitive tax
regime has ensured that financial services institutions
60 A financial auditor audits financial statements and transactions,
keeping in mind the objective of issuing an opinion on the state of
financial affairs, whereas a social auditor looks at the impact caused on
society by the organisation, covering environmental, social and economic
aspects. SEBI defines a social auditor as an individual registered with a
self-regulatory Organisation (SRO) under the purview of the Institute of
Chartered Accounts of India (ICAI).
61. 61 As per SEBI
62. 62 US Dollar (USD) Euro (EUR) Japanese Yen (JPY) UK Pound
Sterling (GBP) Canadian Dollar (CAD) Australian Dollar (AUD)
Swiss Franc (CHF) Hong Kong Dollar (HKD) Singapore Dollar (SGD) UAE
Dirham (AED) Russian Ruble (RUB)

71

Economic Survey 2023-24

operating from IFSC are not at a disadvantage. The contribution of GIFT
IFSC in transforming the country's financial industry landscape can be
better appreciated by looking at some key business activities in GIFT IFSC.
2.89 Banking sector: The Banking ecosystem in GIFT IFSC is rapidly
evolving with a healthy mix of foreign and domestic banks, primarily
catering to the foreign currency borrowing requirements of Indian
corporates and public sector enterprises through external commercial
borrowing, trade finance, etc. Transactions under these heads, previously
booked from foreign financial centres such as Singapore, Dubai, Hong
Kong, etc., are now being booked out of GIFT IFSC. As of March 2024, the
total asset size of IFSC Banking Units (IBUs) crossed USD 60 billion, and
the cumulative value of transactions undertaken by IBUs crossed USD 795
billion.63
2.90 Funds Industry: The robust funds industry in GIFT IFSC has a
transformative impact in catalysing global capital inflows into India,
including the start-up ecosystem. In the last three years, there has been
rapid growth in Fund Management Entities (FMEs) and AIFs registered with
IFSCA. As of March 2024, the cumulative FMEs and funds registered rose
from 39 and 33 as of September 2022 to 114 and 120, respectively, as of
March 2024. Previously, the pooling of international capital for
investments in India was structured through funds (private equity, venture
capital, hedge funds, etc.) set up in offshore jurisdictions. Now, with
enabling regulations, a competitive tax regime, and beneficial cost of
operations, GIFT IFSC is emerging as a preferred jurisdiction for the
pooling of global capital by foreign and Indian fund managers.
2.91 Aircraft & ship leasing and financing: The aviation industry in
India is on the cusp of unprecedented growth, with a strong order book of
more than 1500 + aircrafts placed by Indian airlines and a projected
demand for over 2,200 aircrafts by 2042. Currently, most aircraft operated
by Indian airlines are leased from offshore lessors that have access to
competitive capital costs. The aircraft leasing and financing business, the
most profitable segment in the aviation value chain, was entirely residing
in foreign jurisdictions. Recognising the immense potential of the aircraft
leasing and financing business, IFSCA introduced the enabling leasing
framework, and the Government supported the endeavour by providing
several tax incentives. In three years, green shoots have been visible in
IFSC, with more than 28 aircraft lessors already registered, which have
leased more than 120 + aviation assets, including commercial aircraft,
helicopters, aircraft engines and ground support equipment. Interestingly,
Air India has also commenced leasing its wide-bodies aircraft from the
IFSC Zone.
2.92 Considering the critical role of the maritime and shipping industry,
the Government and IFSCA have taken significant steps to develop a
robust ship leasing and financing ecosystem in GIFT IFSC. The initial focus
is to bring back Indian shipping companies who are leasing/ owning ships
out of foreign jurisdiction. With an enabling regulatory framework, the ship
leasing ecosystem is gaining traction. As of 31 March 2024, the number of
ship leasing companies registered with IFSCA has risen to 11,
underscoring the financial centre's rising appeal for maritime business.
Furthermore, these companies have acquired and leased four
63 Data sourced from IFSC GIFT City
72

Monetary Management and Financial Intermediation

assets from GIFT IFSC. Going forward, IFSCA intends to work with IFSC
Banking Units (IBUs) to develop a vibrant ship and aircraft financing
ecosystem and contribute towards increasing Indian ownership of assets.
2.93 Foreign universities initiative: The IFSC, being an offshore
jurisdiction, is also uniquely positioned to become an ‘international higher
education hub’ by attracting top- quality global universities keenly
exploring India due to its talent and demographic profile. This opportunity
was outlined in the Union Budget FY23, wherein it was stated that ‘World
Class Foreign Universities and Institutions will be allowed in the GIFT City
to offer courses in Financial Management, Fintech, Science, Technology,
Engineering and Mathematics, free from domestic regulations, except
those by the IFSCA to facilitate the availability of high-end human
resources for financial services and technology’. In this endeavour, IFSCA
achieved a significant milestone in FY24 when Deakin University from
Australia became the first foreign university to be granted final
registration for their International Branch Campus in GIFT IFSC under
IFSCA (Setting up and operation of International Branch Campus and
Offshore Education Centre) Regulation, 2022. Additionally, the University
of Wollongong from Australia became the second foreign university to
receive in-principal approval for their International Branch Campus in GIFT
IFSC. The entry of two foreign universities in GIFT IFSC has paved the way
for other globally reputed universities to look at this opportunity and
contribute to the rise of an educated and skilled India.
2.94 There are several ongoing reforms to establish IFSC as a reputed
international financial centre towards achieving the dual mandate of
development and regulation of financial services. IFSCA is in the process
of implementing robust regulatory and supervisory systems backed by
best-in-class technology. The announcements made in the Union Budget
FY24, such as a single window IT system for registrations and delegating
powers under the SEZ Act to IFSCA to avoid dual regulations, will enhance
the ease of doing business. The IFSC is expected to emerge as a preferred
gateway for global capital flows into and out of the country.