GIFT City is aiming to become a global hub for commodity trading, with its regulator seeking legal changes to enable international trading, hedging and financing of commodities such as crude oil, gold, metals and agricultural products from India’s financial services centre. The International Financial Services Centres Authority (IFSCA) has written to the Finance Ministry seeking formal recognition of commodity trading as a financial activity under the law governing GIFT City, IFSCA Chairperson K Rajaraman told.
Why India wants to onshore commodity trading
Rajaraman noted that despite India being among the largest consumption markets and importers of many commodities, most trades are executed from other financial centres rather than domestically, with many Indian firms currently operating out of Singapore, Dubai and Switzerland. He said GIFT IFSC already has the characteristics of a global financial centre, a strong banking network and a favourable tax regime, making it well placed to onshore Indian firms that have migrated abroad.
Following the bullion trading model
The proposal mirrors the path taken for bullion trading, which gained statutory recognition before 2020, paving the way for the India International Bullion Exchange launched in 2022. IFSCA now wants similar recognition extended to a broader range of commodities, enabling electronic trading, hedging through derivatives, trade financing, merchanting and reinvoicing of global transactions.
Scope limited to financial activity
Rajaraman clarified that IFSCA would regulate only the financial aspects of commodity trading, while physical infrastructure like warehousing and logistics would remain under the existing FTWZ and SEZ framework. GIFT City’s banking assets have crossed $111 to $114 billion, with fund commitments reaching $39.3 billion.
