While the Iran war has affected the world and India will also have to bear the brunt of it in the form of higher oil prices and resulting inflation, there is also a hidden opportunity in it. If implemented properly, it can significantly enhance our economic growth and generate substantial indirect-revenue for the government. Have you become curious after reading this? Then keep reading further. The Middle East has long been home to some of the world’s most prominent global-cities. Dubai, Abu Dhabi, Doha, Kuwait City, Riyadh have gained recognition as safe, tax-friendly and business-friendly locations. It has attracted expatriates, entrepreneurs and high-net-worth individuals from around the world. Although these characteristics of these cities still remain intact to a large extent, global investors are now looking for new options in the era of geopolitical uncertainty. And therein lies the opportunity for India. This idea already existed, but the current global scenario makes it especially relevant. India could consider developing a similar tax-friendly and globally competitive city here – creating its own version of models like Hong Kong, Singapore or Dubai. We should know that other countries of the world have already started establishing themselves as alternatives. Countries like Greece are promoting investment-based residency programs (residency-by-investment). Turkey also recently announced a 20-year tax holiday on foreign income to attract new residents. Hong Kong, which is a special administrative region of China, can also prove to be a useful reference point here. Despite being part of China, it operates under a different legal, regulatory and tax framework, with relatively lower tax rates and better ease-of-doing-business. It should be noted that many of the world’s successful global centers have used low-tax policies to drive growth. Even in such models, governments earn revenue through alternative means – such as fees, real estate development and economic activities. In an increasingly globalized world, capital and talent have become highly mobile. If India does not create a competitive eco-system, these will flow to other sectors. The question is not whether we should have such centers here or not, but where they are going to be built. Why not develop a globally competitive city within India? Not just a real estate project targeting NRIs, but a fully functional economic-zone, where individuals and businesses can operate at global standards. Where Indians reside, they get the same treatment as NRIs, in the context of that area. Obviously this would mean that different laws would apply in that city. Identity cards will have to be issued for those living and working there. A kind of ‘immigration’ system would also have to be created to ensure who comes in, who goes out, and who is staying there – all of which is entirely possible with today’s tracking technologies. This will require clear legal structures, streamlined residency systems and policy certainty. Such mechanisms can be fully implemented with modern technology and administrative tools. Some may see Gujarat’s GIFT City (Gujarat International Finance Tech-City) as a step in this direction. Undoubtedly, this is a promising start, providing an eco-system of international financial services. However, it still does not have the full autonomy and policy flexibility found in established global centres. To truly compete, India must take this concept to the next level. By developing a globally competitive economic city we can attract capital, talent and innovation. We must seize this opportunity to ensure that global capital contributes to the creation of prosperity within our own borders. (These are the author’s own views)
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Chetan Bhagat’s column: We have to develop cities that can compete with the world
