Lately it has become a trend that the Indian startups are relocating abroad. In response to it, the International Financial Services Centre (IFSC) in GIFT City, Gujarat, has stepped up. It has drawn attention to startups undergoing structural changes, termed “flipping,” and its impact on India’s startup scene. It is led by former RBI executive director G Padmanabhan.
The findings of the committee reveal that a notable 56% of India’s 108 unicorn startups are now registered overseas, despite the majority of their core operations remaining firmly within the country. This practice, known as “flipping,” involves transferring ownership and intellectual property to an overseas entity while preserving the same ownership structure.
This trend is driven by various factors, including India’s comparatively high corporate tax rate, external investor demands to relocate operations overseas, the appeal of tapping into global capital markets, worries about the strength of India’s intellectual property protection laws, and the attraction of global talent pools and customer bases. Regrettably, these shifts have substantial adverse effects on India, including the loss of valuable human talent, diminished value creation in the local market, and the possibility of negatively impacting the country’s digital diplomacy initiatives.
In response to this challenge, the committee suggests that GIFT IFSC can play an important role in bringing the startups back to India. GIFT City, conceived as a globally recognized financial center boasting favorable business regulations and tax structures, offers numerous advantages, including flexible foreign currency transactions, a business-friendly regulatory environment and proximity to fintech hubs. By leveraging these advantages, it aims to restore India’s status as a preferred destination for startups and innovation, thereby contributing to the economic growth and bolstering its technology ecosystem.
