The Abu Dhabi Investment Authority (Adia), the UAE’s largest sovereign wealth fund, will set up a $4 billion to $5 billion fund in India’s latest special economic zone.
The regulatory authority for financial services at Gujarat International Finance Tec-City (Gift City) has granted in-principle approval to the state-owned investor to set up the fund, the Reuters news agency reported, citing informed sources. The approval will make Adia the first sovereign wealth fund to begin investing in India via Gift City.
The fund, with $853 billion in assets and one of the world’s largest institutional investors, announced its intention to establish a presence in Gift City last July.
According to the Sovereign Wealth Fund Institute’s rankings, Adia ranked as the third-largest in the world, is one of the world’s largest institutional investors. Norway’s sovereign wealth fund is the largest in the world and with over $1.26 trillion in assets, and the China Investment Corporation is second with $1.22 trillion.
The approval comes days before India’s Prime Minister Narendra Modi is due to visit Abu Dhabi to open the BAPS Hindu Mandir, a traditional Hindu place of worship. Since becoming prime minister a decade ago, Modi has visited UAE six times, strengthening ties with India’s third-largest trading partner with a landmark Comprehensive Economic Partnership Agreement (Cepa) in 2022, following which trade between India and the UAE surged to $85 billion for the financial year ending March 2023.
“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,” Reuters quoted informed sources as saying.
Funds which are set up at Gift City can invest in Indian and foreign equities and debt securities, among other assets.
Finance Minister Nirmala Sitharaman, while announcing the federal budget this month, said the government aims to build up Gift City as a “gateway for global capital and financial services for the economy’.
The zone offers a 10-year tax holiday for companies setting up there, no taxes on the transfer of funds from overseas jurisdictions and closeness to Indian markets.
Adia and its wholly-owned subsidiaries have specifically been exempt from long-term capital gains taxes from Indian investments via a special provision introduced in 2020 and applicable till March 2025.
A spokesperson for Adia, according to Reuters, declined comment. An email to the International Financial Services Authority (IFSCA), which regulates financial services in the hub, was not answered.