In exciting news for the Indian financial landscape, Abu Dhabi Investment Authority (ADIA), the largest sovereign wealth fund in the UAE, is in the process of establishing a substantial fund ranging from $4 to $5 billion. The aim is to channel these investments into India through a tax-neutral finance hub located in the home state of Prime Minister Narendra Modi—Gujarat. This development comes from two sources closely familiar with the matter.
The regulatory body overseeing financial services at Gujarat International Finance Tec-City, known as GIFT City, has provided in-principle approval for ADIA to set up this significant fund. The sources, who wish to remain anonymous due to a lack of authorization to speak to the media, revealed this information. The announcement of ADIA's intention to establish a presence in GIFT City was initially made in a joint statement by India and the UAE last July. Notably, the details of the planned investment amount and the regulatory approval had not been reported until now.
While a spokesperson for ADIA has chosen not to comment on the matter, an email sent to the International Financial Services Authority (IFSCA), responsible for regulating financial services in the hub, remains unanswered.
This development marks a significant milestone as ADIA is poised to become the first sovereign wealth fund to initiate investments in India through GIFT City. The approval arrives just days before Prime Minister Modi's scheduled visit to Abu Dhabi, where he is set to inaugurate a sizable temple. Modi's diplomatic efforts over the past decade, involving six visits to the UAE, have strengthened the relationship with India's third-largest trading partner. Trade figures between India and the UAE reached $85 billion for the financial year ending March 2023, as per data from the Indian government.
It is worth noting that the UAE is home to one of the world's largest Indian diaspora populations, numbering 3.5 million individuals, accounting for almost 35% of the UAE's total population.
According to one of the sources, "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," without providing further details. This development underscores the growing economic ties between India and the UAE, opening up new avenues for investment and collaboration.