INTRODUCTION• Mumbai is the commercial and entertainment capital of India, it is also one of the worlds top 10 centers of commerce in terms of global financial flow, generating 5% of Indias GDP, and accounting for 25% of industrial output .• Mumbai is home to important financial institutions such as the Reserve Bank of India, the Bombay Stock Exchange, the National Stock Exchange of India, the SEBI and the corporate headquarters of numerous Indian companies and multinational corporations.
It houses some of Indias premier scientific and nuclear institutes like BARC, NPCL, IREL, TIFR, AERB, AECI, an d the Department of Atomic Energy. Mumbais business opportunities, as well as its potential to offer a higher standard of living, attract migrants from all over India and, in turn, make the city of many communities and cultures.
CONCEPT RELATED TO TOPICWhat is an International Financial Centre?An international financial centre is a place where financialinstitutions from many different jurisdictions come together tocarry out financial intermediation of an international dimension. Characteristics of an International Financial Centre include: A centre from which international financial business can be conducted profitably, easily and efficiently.
A centre with skilled management and intellectual talent covering Business, Finance and interdependent services such as legal and accounting, to provide multi-disciplined teams that facilitate large cross borders transactions in the shortest possible time frame. A centre with deep liquid and sophisticated capital market and world competitive tax and regulatory regimes with foreign investment and offshore business flow. A centre that can add significant value to financial services provided from it, through a workforce that can respond promptly and in an innovative manner.
A centre with the World’s best telecommunications and IT capacity and imbued with plentiful, well educated, multilingual workforce. A centre where all facets of financial services: senior traders, regional headquarters, treasury operations, data processing, support functions and call centers, can be located efficiently. A centre with convivial and alluring environment for business
PREREQUISITE FOR BUILDING AN IFCThe Government should formulate specific policiesto promote the efficient functioning of the financialsystem in the following manner :a.Policies concerning financial infrastructureb. Policies concerning financial intermediationc. Policies concerning the regulatory regime
PRESENT SCENARIO• Mumbai is the prime economic engine of India. Mumbai and its surrounding regions contribute to one-fifth of GDP.• The Bombay port handles 46 per cent of the foreign trade and Bombay pays one-third of the income-tax of the nation.• Out of the tax revenue generated by the four metros, Mumbai contributed to about 50 per cent.
The Indian debt market ranks third in Asia, after Japan and South Korea in terms of issued amount. Mumbai accounts for a significant share in deposits mobilization (14 per cent of total deposits) and deployment of credit (21 per cent of total credit) of scheduled commercial banks. In terms of banking sectors transactions in clearance of cheques, Mumbais share is as much as three-fourths of the total clearances.
Mumbais presence is overwhelming both in money market and the foreign exchange market transactions. Mumbai, being a home to the National Stock Exchange and Bombay Stock Exchange, dominates the turnover and total market capitalization of the India stock markets. The present of a large number of financial markets players such as foreign institutional investors (FIIs), term lending institutions, merchant bankers, broking houses and so on, makes Mumbai a favourable place for an IFC.
Nearly 80 per cent of mutual funds are registered in Mumbai. Practically, all FII investments and over 90 per cent of merchant banking transactions happen in Mumbai. The headquarters of a large number of regulatory agencies including the Reserve Bank of India and Securities and Exchange Board of India are located in the city. Mumbai is truly an agglomeration of the right skills and the right framework for integrated delivery of financial services.
The city has a large population of highly skilled English speaking employees and a reputation for attracting the best managerial relent. A significant number of MBAs, chartered accountants, legal advisers and research professionals are based in the city.
DISCUSSION RELATED TO ARTICLEPercy s Mistry is chairman of expert group ofMumbai as an IFC and author of the MIFCreport, published in Reforms 20 20.MIFC Report point out that MIFC would beuseless if India did not:a) improve the sophistication of its financial systemb) make Mumbai a ‘global city’ similar to Singapore, London and New York.
Mistry doubts about MIFC emerging due to 11reasons :1. Lack of commitment to financial systemreform:There is no commitment by central, state ormunicipal governments to implement what wasadvocated. Reforms are necessary for India’sfinancial system to meet the increasinglysophisticated needs of its real economy. 2. Little progress in implementing MIFC report:About 80% of the recommendations made in MIFCreport have been ignored.
3. Financial system /market regulation and supervision by RBI remains antediluvian; stuck in command – control, micro–management mode: The 2008 debacle has convinced India’s knowledge- proof legislators, policy makers, regulators and public that it is safer to have a primitive, micro- managed, state-controlled, financial system, with credit directed by MoF/RBI.4. Imbalanced financial system: India’s financial system is lop-sided in a way that would disable MIFC. It is subjected to locally and globally induced volatility co-exists with an infirm, undeveloped debt market.
5. No bond market: No IFC can function without a wide/deep domestic bond market at its core which it plugs into the global debt market. In India, 85% of the paper in the bond market is issued by government of India and its instrumentalities.6. No ancillary supporting currency, Derivative & commodity markets: The report noted that bond markets do not function if unaccompanied by markets for currencies, derivatives, insurance, pensions and commodities.
7. Inefficient risk/term financing: Indian policy-makers seem unaware that the absence of a bond market accompanied by ancillary markets disables India’s ability to finance infrastructure.8. The Relentless Degeneration and Diminution of Mumbai: Mumbai is a city in which political violence have been legitimized by convection, despite their criminality. Local politics is killing the goose laying golden eggs for so long.
9. Urban-rural transfers: Mumbai has corrupt state politicians enriching themselves through an unholy nexus with slum landlords, builders and property developers.10. Collapsing infrastructure: The city is unpleasant and unlivable. It has pollution, privation and public filth that should not be tolerated in any civilized country. That is hardly conductive to the emergence of an IFC.11. Cultural suffocation: The multi-ethnicity and multiculturalism that made Mumbai what it was, is now under daily attack and suffers mindless cultural suffocation.
CONCLUSION Economic Renewal of Mumbai City is in therealm of possibility. It will require a concerted andco-ordinate effort of the Government, the PrivateSector and its citizens to remove the obstacles tofoster development and towards making Mumbai anationally and internationally desirable destinationfor business and investment.