China is on a rampage in Hong Kong. The autonomy of the island-city lay in shreds after Beijing slapped it with a harsh security law on 30 June that threatens to muzzle free speech and punish anyone whose actions fall afoul of the Chinese regime. For months, there had been signs that it would not honour its commitment to preserve the democratic freedoms of Hong Kong’s residents, a 50-year pledge made in 1997 when it got the territory back from the UK. But Beijing’s latest move has stunned the world, evoked another round of protests in the city, and reportedly plunged many of its finance professionals into despair. For nearly a quarter century, they thrived on the “one country, two systems" paradigm, living off China’s blistering rise while doing accurate research and analysis of Chinese businesses for global investors. Today, analysts fear that an honest job done could serve truths too bitter for China’s high-and-mighty and so they might end up behind bars for their efforts. In short, the new law could spell doom for Hong Kong’s status as Asia’s top financial centre. A race to replace it is already underway, with Singapore, Tokyo and Dubai as contenders. But if Mumbai gets itself up to speed, it may have more than just a glimmer of a chance.
The last time the idea of Mumbai emerging as a global financial hub animated Indian ambitions was in 2007, when an expert committee led by Percy Mistry submitted an official report on the prospect. The city was reckoned to have the requisite talent pool, but was found short on infrastructure. The report’s emphasis was on globalization, for which it recommended sweeping financial-sector reforms that would let Mumbai position itself—at least in regulatory terms—in the same league as London or New York. Much of it was impractical. Its call for full convertibility of the rupee on the capital account, for example, was too premature. It would have compromised our central bank’s control of either its exchange-rate or monetary policy. The document also asked for the Reserve Bank of India (RBI) to quit its role as the government’s debt manager to focus on currency stability. A 2015 attempt to do this was dropped, though inflation-targeting was made RBI’s explicit mandate. The report also sought other changes, many of them aimed at letting markets for bonds and suchlike boom. Given the sector’s socialist legacy, though, with key sub-sectors such as banking dominated by the state, the proposals seemed too daunting and Mumbai’s global dream fizzled out.
Apart from better telecom links and data enablement, not much seems to have changed in Mumbai’s favour since 2007. Yet, recent trends suggest that global integration need not matter as much as it did back then. Data can be crunched anywhere. In the current context of anxiety over Hong Kong’s financial services, perhaps a crucial enabler of quality output now is the rule of law, especially freedom of speech. This is stuff on which Mumbai could claim an edge over rival cities vying for business. Asia is already this century’s action zone and high-value information on its economic emergence would be processed best in a democratic setting that bustles with expertise. Mumbai is well acquainted with diversity. It also lies in a convenient timezone between the East and West. Both of these are added assets. Maybe a few strategic reforms at this juncture could turn Hong Kong’s loss into Mumbai’s gain.