Mumbai as an international financial centre rivalling London and New York? Most people would regard this as a fantasy. But not a high-powered expert committee (HPEC) constituted by the finance ministry. The HPEC submitted its report sometime ago and I had a chance to critique it in the Economic and Political Weekly.
I must confess I read through the 200 page report with a sense of disbelief. 'Radical' is too mild an expression to describe the recommendations. These are sweeping in their scope: financial sector reforms, macroeconomic reforms, urban governance, the legal framework- all is grist to the HPEC's mill.
Some of the reforms are happening and the trend will continue. But others are unlikely to happen in a hurry. To give just one example: the HPEC recommends that 'City managers' run Mumbai so that it is freed from the stranglehold of the political class and the bureaucracy. Those who know anything about the formation of the state of Maharashtra would know that it was impossible for the centre to keep Mumbai out of Maharashtra even then. To imagine that control over the city can be wrested from politicians now is the height of absurdity.
My main problem with the report is that the effort just doesn't seem to be worth it. As I state in my critique, if we did everything that the HPEC wanted, we would add produce financial services exports amounting to 10% of total exports down the road. A case of a mountain of labour producing a mouse!
There are parts of the financial system where major changes and innovations are necessary and desirable. The bond, currency and derivatives markets need to be quickly developed and the HPEC makes out a good case for it. Alas, this good bit is likely to lost with the vast portion that will be seen as impossible to implement.
Another missed opportunity, I'm afraid.
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6 comments:
Difficult for me to comment on much of the specifics - but even the projected 10% sounds good actually - after all it is a "projection" - and the percentage could be much higher ... particularly if NYSE and the US Capital Markets keep getting assaulted by people like Elliot Spitzer (when he was Atty General of NY and now the Governor) ... To quote from a Wall Street Opinion piece (June 22, 2007)
Mr. Schumer and his ally, New York Mayor Mike Bloomberg, co-sponsors of a report on the challenges facing U.S. capital markets. They have offered grim news on the declining attractiveness of a U.S. stock listing for international companies, citing excessive litigation in particular. In 2006 alone, U.S. companies shouldered $17 billion in settlements of lawsuits brought in the name of shareholders, though usually with a class-action law firm as a chief beneficiary. That same year, Wall Street got only 7.2% of all initial public offerings world-wide, down from 50% in 1999. Coincidence? Even scourge of Wall Street turned New York Governor Eliot Spitzer is calling for reform
Ofcourse as Attorney General, Spitzer went after everyone - essentially threatening them with everything since he had the power of the Government behind him and unlimited time and money ... Now that he is Governor and finding Capital Flight (as it were) he has a change of heart, so it seems ... (The fact that the Courts found for the AIG Chairman (Greenberg) recently after Spitzer essentially tried to blackmail Greenberg, no doubt contributes some to Spitzer's change)
So a lesson for Mumbai is _ Go for it. Watch as NYSE and the Capital Markets commit suicide while trying to protect "shareholders" and "common men" ... Mumbai needs to work NOW to get ready as companies/capital find better places than NY City ... it is not as far fetched as it may seem
But, no - I do not trust Spitzer or the Tort Lawyer's Lobby - they are out to get money anyway they
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