Mumbai: Finance minister P. Chidambaram blamed the lack of political will in undertaking key regulatory reforms as the major obstacle in transforming Mumbai into an international financial centre (IFC).
He was launching the first in a series of roadshows to discuss and debate a report called Mumbai—An International Financial Centre, prepared by a high-powered expert committee set up by the ministry of finance. Headed by Percy Mistry, chairman of the London-based financial consulting company Oxford International Group, the 20-member committee included ICICI Bank Ltd chief executive officer and managing director K.V. Kamath and HDFC Bank Ltd managing director Aditya Puri.
The contentious nature of some of the key reforms recommended by the report, such as fewer financial sector regulators, full convertibility for the rupee and a stronger bonds, currency and derivatives market, set high hurdles ahead of transforming the city into such a centre.
“We need to make greater effort to convince all about the advantages of deregulation,” Chidambaram said. The report is a “do-it-yourself manual on how to make Mumbai an IFC,” he said. But, “it can be adopted only by a society that wants to reinvent itself and is forward- looking.”
There is a $13 billion (Rs54,600 crore) market for international financial services in India, which is currently not being met because India lacks an IFC, the report says. Apart from providing financial services for the domestic market, Mumbai, with its pool of qualified English-speaking professionals, can also provide financial services to the rest of the world, the report concluded.
Just as India has emerged as the hub for IT and high-skilled manufacturing activities, the report aims to help create a global financial hub in the country. “Its aim to emerge as a global financial hub will also help reinvent Mumbai,” said Vijay Kelkar, chairman of IDFC Private Equity.
According to the report, three years of over 8% growth, strong corporate growth and foreign institutional flows have underscored the need for India’s own financial hub. Providing international financial services will facilitate broader economic growth, said Ajit Ranade, chief economist of the Aditya Birla Group.
Other panellists present on the occasion said Mumbai is competing with Dubai, Singapore and other major cities for the financial services business in the region. They also cited the examples of three major international financial services companies setting up shop in the city over the past year to illustrate Mumbai’s importance.
“We feel that the city has embraced us,” said Brooks Entwistle, chief executive of Goldman Sachs India Pvt. Ltd.
However, Mumbai’s creaking urban infrastructure is also an issue for financial institutions that want to set up shop in the city and for talented professionals who want to move here. The city’s transportation systems, high real-estate costs and shortage of trained finance professionals dent the city’s attractiveness. “This is Mumbai’s moment,” said Entwistle. “But, it is a fleeting moment and we have to take advantage of it.”