Abu Dhabi Investment Authority (ADIA), one of the world’s largest sovereign wealth funds, has established a subsidiary in Gujarat International Finance Tec-City (GIFT City), India’s first operational smart city and International Financial Services Centre (IFSC). This strategic move underlines ADIA’s growing interest in India’s financial ecosystem and is expected to accelerate the UAE’s investments in key sectors of the Indian economy.
ADIA’s decision aligns with the broader UAE-India economic collaboration that has deepened in recent years, driven by the Comprehensive Economic Partnership Agreement (CEPA). Signed in May 2022, CEPA has already resulted in substantial gains in bilateral trade, particularly in non-oil sectors, reaching $28.2 billion in the first half of 2024 alone. This agreement, designed to remove trade barriers, has also spurred significant foreign direct investment (FDI) inflows into India, with ADIA playing a prominent role.
The new subsidiary will benefit from GIFT City’s unique regulatory and tax advantages, enhancing ADIA’s capacity to manage and diversify its global portfolio from India. GIFT City offers a conducive environment for international businesses, with simplified tax regimes, ease of operations, and direct access to Indian and global markets, making it an attractive hub for financial activities. ADIA’s expansion into this zone signals a potential increase in UAE-driven investments, particularly in infrastructure, real estate, and technology sectors, areas where India is actively seeking foreign capital.
This development follows a series of UAE-led initiatives in India, such as the establishment of food parks and logistics hubs, and marks the strengthening of bilateral ties under the leadership of Indian Prime Minister Narendra Modi and UAE President Sheikh Mohamed bin Zayed Al Nahyan. Both leaders have emphasized the significance of UAE’s investments in India, with projects spanning across infrastructure, renewable energy, and technology sectors. The bilateral focus is not just on economic gains but also on fostering sustainable growth and innovation.
ADIA’s growing footprint in India is part of a broader trend of Middle Eastern sovereign wealth funds seeking to diversify their investment portfolios amidst global economic uncertainties. India, with its burgeoning middle class, robust consumption patterns, and ambitious infrastructure development plans, has emerged as a prime destination for such funds. ADIA’s investments are not only expected to boost India’s financial services sector but also contribute to the creation of high-skilled jobs and the development of a sophisticated financial ecosystem.
The subsidiary in GIFT City is anticipated to further bolster ADIA’s long-standing presence in India, where it has already invested in a variety of sectors including logistics, highways, and affordable housing. Over the past few years, the fund has also collaborated with local partners to channel investments into emerging sectors like e-commerce, technology, and healthcare. The new base in GIFT City could facilitate the expansion of ADIA’s investment portfolio, providing opportunities for greater collaboration with Indian companies and startups, especially those focusing on cutting-edge technologies like artificial intelligence (AI) and renewable energy.
With ADIA’s move into GIFT City, the potential for synergies between UAE’s sovereign funds and India’s development goals has significantly increased. GIFT City is positioned to be a critical financial hub, and the entry of global players like ADIA could accelerate the transformation of this zone into a regional powerhouse. India’s policymakers have been actively promoting GIFT City as a destination for international financial services, aiming to attract leading global financial institutions to establish a presence there. ADIA’s entry could prompt other sovereign funds and multinational corporations to follow suit, further cementing GIFT City’s role in global finance.
The announcement of ADIA’s subsidiary comes at a time when India is also witnessing a surge in foreign investments across various sectors, thanks in part to favorable government policies and the country’s economic resilience. Despite global headwinds, India remains one of the fastest-growing economies in the world, and its government has been keen on securing investments that contribute to long-term growth. The cooperation between India and the UAE, symbolized by initiatives such as ADIA’s expansion, is seen as a key pillar in India’s broader strategy to bolster its economic prospects through strategic partnerships with key global players.
