It could have transformed Mumbai from a city of slums into an international megalopolis, with world-class infrastructure, high-powered jobs in the financial sector and a flood of foreign currency and investment.
But the global economic downturn has put the brakes on that dream, at least for now.
Three years after then Finance Minister P Chidambaram proposed Mumbai as a future International Finance Centre (IFC), there has been no headway in the plan. And, if state officials and business executives are to be believed, there will be no action on it this year either.
“Ever since the global downturn began, there has been no political will to talk of financial reform or opening up of Mumbai’s markets as an international financial centre,” said Narinder Nayar, chairman of Bombay First, an initiative of private businesses to transform Mumbai into a world-class city. “There will most likely be no dramatic announcement on this front this year either. The IFC plan is as good as shelved.”
The argument being made now, says Nayar, is that India remained largely immune to the downturn mainly because it did not have exposure to too many complex, cross-border financial transactions.
That would be one of the first things to change, if Mumbai were to be developed as an IFC. At a time like this, says Nayar, no one in the Union Finance Ministry is likely to propose that we begin to make such changes.
In the 2007 Budget, though, that is exactly what the Finance Ministry-commissioned report had recommended, mainly through amendments to regulatory mechanisms like the Reserve Bank of India Act and Foreign Exchange Management Act.
The amendments would enable Mumbai to do more — and more complex — cross-border financial transactions.
“These reforms are unlikely any time soon in India, given today’s political pressures,” said a senior bureaucrat. “That report is no longer relevant.”
A number of experts do not agree. “The city has many natural advantages that make it an ideal candidate for development as an IFC,” said former state government bureaucrat Sanjay Ubale, now managing director of Tata Realty and Infrastructure. “If we don’t get a push in the right direction, at the right time, we may lose these advantages. Already, Chennai is setting up an IFC — and Ahmedabad already has one. We need to begin making the regulatory changes. We also need to get our infrastructure in place.”