Former Infosys CFO Mohandas Pai has drawn the government’s attention to a new rule by regulator Gujarat International Finance Tec-City (GIFT) that prohibits local family offices from setting up mutual funds in the new financial hub. Mohandas Pai says this would hamper global investment.
Sharing his concerns in a social media post on X, he wrote, “pm@narendramodi Sir, this goes against everything you are asking Indians to do to globalise, be globally competitive and build a developed India! This requires global investment, understanding trends and creating networks. Please intervene @PMOIndia (sic).”
Clock @narendramodi Sir, this contradicts everything you are asking Indians to do to globalize, be globally competitive and build a developed India! This requires global investment, understanding trends and creating networks. Please intervene @PMOIndia https://t.co/qhk3AErvfr
— Mohandas Pai (@TVMohandasPai) 21 August 2024
Mohandas Pai expressed his views by sharing a post by another user, Rajeev Mantri, who stated that the proposed regulation will not allow access to critical international technologies.
“Here we go again: Indian regulators have banned local family offices from setting up mutual funds in their new financial center, fearing that these arrangements could be used to evade taxes and capital controls,” says Rajeev Mantri’s article.
“Yet another pathetic decision by a regulator who cannot stop celebrating any prize awarded by a third-rate Italian magazine. The cost is: Indian financial investors cannot buy and acquire critical technologies, leaving the field to American, European, Japanese and even Chinese buyers (sic),” he added.
The user added that the new rule will further restrict foreign investment. “A few years later, we as a country will be begging for FDI in the same countries. The regulator will grin as he wins another award for his ‘macroprudential’ approach. Risk-free life only exists when you are dead (sic),” it said.
Concern about tax evasion
Recently, market regulators have stopped allowing local family offices to launch investment funds in their new financial center due to concerns about tax evasion and capital controls, according to Bloomberg.
Following feedback from the Reserve Bank of India (RBI), the regulator for GIFT City has stopped issuing approvals for family mutual funds.
The RBI has expressed concerns that easing capital controls could lead to money laundering. This new move could affect GIFT City’s ambitions to be a one-stop shop for high net worth individuals seeking foreign investment. The financial hub in Gujarat was set up as a free market pilot with different rules on taxes and capital flows.
