The long-pending proposal to develop Mumbai into an International Financial Services Centre (IFSC) today got a boost with the government saying it is keen to transform the city into a global financial hub.
"We are keen to transform Mumbai as a global financial centre... It is a necessity that we have to create Mumbai as a global financial centre," Union Minister of State for Finance Jayant Sinha said today.
Maharashtra Chief Minister Devendra Fadnavis said that the state government is already working in this regard, but much of the work was to be done by the Centre and the pending issues in this regard should be addressed in the upcoming Union Budget.
Centres like Dubai and Singapore have made their presence in the international financial map. For such a facility to materialise here, firms within such centres, which would be handling money from across the world, should enjoy special treatment on regulatory and taxation fronts.
"We understand that if we get banks and investment firms here, there will be more capital deployed into the economy, there will be more jobs," Sinha said addressing a 'Mumbai Next' here.
Government and various financial sector regulators including RBI and Sebi are mulling over a new set of norms to be applicable to IFSCs (International Financial Services Centres), which can be set up in different parts of the country for domestic and international investors, sources have said.
The GIFT City in Gujarat can be the first off the block under this new regime, which another IFSC can be developed in Mumbai, the country's financial capital.
Fadnavis said the world over such centres have been developed with the help from the respective federal governments and welcomed the support assured by the Centre in this regard.
"I feel the first thing, which was expected from the government towards making BKC a global financial centre...we have already started working on it and our role as the local government is to create the ecosystem," Fadnavis said.
While Mumbai already hosts the highest economic activity in the country, experts have been stressing on the need to elevate its stature to a global level, citing advantages like the city's position on the international time zones.
According to experts, India get at least four working hours with the financial powerhouse of London which can attract the stakeholders in trove here.
"The strategic location, stable environment and industrious people in Mumbai make it very well placed," Sinha said, adding a place like the centrally located business district of Bandra Kurla Complex (BKC) can play host to all the storied names in high finance.
"It is a necessity that we have to create Mumbai as a global financial centre," he added.
Fadnavis hoped some announcements in this regard will come in the upcoming Budget. He said Sinha has some "constraints" due to his office, but after "reading between the lines," it is clear that something is coming up.
"Much of the role is with the Centre and I think Sinha understands it better, I am sure most of your concerns will be addressed in the coming budget of the Centre," he said.
Sinha said at present the financial capital contributes to about 15-17 per cent of the new wealth creation in the country and going by that it will be adding another USD 1 trillion in wealth and market capitalisation over the next 10 years.
"That is the resource we need, that is the fuel we need to power Mumbai's growth forward. I am very sure it will happen," he said.
Commenting on the proposal, SBI chairman Arundhati Bhattacharya called for full convertibility of the rupee, saying this is a pre-condition for any such facility.
"Definitely, infrastructure is not the only thing, but infrastructure is the prime thing. We have another disadvantage in the rupee being not fully convertible, though it can happen sometime down the line," she said, adding that we need to first position ourselves as an IFC.
She also noted that China also did the same thing while developing the Shanghai IFC. Today, the yuan is used in many centres for bilateral trade and bilateral payments. A lot of Chinese imports are getting denominated in the yuan.
"In the meanwhile, we need to create the infrastructure, the kind of facilities that other centres have created so that going forward when the time comes for the convertible to happen, we are almost there or fully there and the whole thing can just fall into place," Bhattacharya said.
On the timing over the capital account convertibility, she said it won't happen till the economy picks up and until we get most of the deficits -- current account and fiscal-- well under control. It necessarily will have to be preceded by a very good round of economic growth. So, I would say the timing would be anywhere 7-8 years, she added.
Standard Chartered India country head Sunil Kaushal said a central plan has to be developed, that is where the chief minister has to work with Delhi. It can't be done by opening a BKC alone.