It has been a decade since former finance minister P Chidambaram proposed to position Mumbai on the world map as an international finance centre and eight years since the Percy Mistry Committee laid down a road map for achieving that goal.
But since then, a rival, the Gujarat International Finance Tec-City (GIFT) a finance SEZ spread across 885 acres near Ahmedabad — has come up, merely 500 km away.
Earlier this year, the Maharashtra state government revived the plan to build an international finance centre by turning Bandra Kurla Complex into an SEZ . Union minister of state for finance Jayant Sinha is heading a new taskforce for this project.
“It’s unfortunate that even after so many years no positive decision has been taken in respect to making Mumbai the international finance centre. Even now, we are scrambling to get the minimum area in BKC so that it can be declared as an SEZ for it to become the international finance centre,” said Narinder Nayar, chairman at Mumbai First, a think tank comprising industry representatives.
Now, the government has suggested extension of the boundaries of BKC by four hectares to fit into the criteria of an SEZ. But most of the adjoining government land is encroached.
A senior state government official, who did not wish to be named said, “The BKC plan, by and large, is agreeable to Jayant Sinha and officials from the ministry of trade and commerce. Now all we are waiting for is some kind of a formal announcement from the Prime Minister’s level to go forward with this.”
The bureaucrat said a statement at the Prime Minister’s level, like the one he made in case of Gujarat’s GIFT City, will give the project a formal backing and also go down well with potential investors.
But experts and investors say there are bigger issues than just land acquisition and that key steps to get this project going would better infrastructure and simplification of laws.
“Percy Mistry’s report showed the work that’s required. Most of that policy work has not been implemented,” said Ajay Shah, professor at the National Institute of Public Finance & Policy, and a member of Financial Legislative Reforms Commission. The panel had recommended far-reaching policy changes such as the need for a separate public debt management office, goods and services tax, full capital account convertibility and principles-based regulation. While there has been some movement on these, they are stuck at various levels of legislation.
Asked whether Mumbai would be a step closer to becoming an international finance hub once BKC is notified as SEZ, Shah said, “IFC is not a real estate project. Neither GIFT nor BKC can work as IFC until problems of regulation are fixed.”
Typically, free movement of capital, clarity in financial laws and regulation and stellar infrastructure are pre-requisites to compete in the international financial services market, say experts.
“We need absence of exchange controls completely. Since there is no exchange control for foreigners, we are almost halfway there. Apart from this there has to be infrastructure for skill training, physical infrastructure like schools, hospitals, entertainment complexes and most importantly the state government should foster ease of doing business. In some of these requirements Mumbai ticks the boxes but in most there is still a long way to go,” says U R Bhat, managing director at Dalton Capital, a foreign institutional investor.
While some local businessmen blame the Mumbai project for not taking off because of the preference given to GIFT, they say in the same breath that the latter hasn’t really taken off since it was launched nine months ago. That’s not without reason. Things such as financial laws and regulations and capital controls are beyond the ambit of state governments; they would need action from the Reserve Bank of India and Parliament.”