Mumbai as an IFC? Think Again!

Mumbai has had the potential to emerge as a regional financial centre between Dubai and Singapore for over a decade. We still have that opportunity but it would appear, by the theory of revealed preference, that we don't care for that opportunity and, in all probability, will do nothing about it.

Percy Mistry had headed a committee on just this topic three years ago. It gave a comprehensive overview of the basic requirements for financial sector reform and regulation if we were serious about emerging as such a centre a decade down the line. Of the 48 recommendations presented in the executive summary of the report, however, not one has been attempted so far.

As that expert committee report pointed out, London, New York and Singapore are the only global international finance centres today. Many aspire to achieve this status, namely, Shanghai and Dubai. Paris, Frankfurt and Tokyo connect their financial systems to the world. Clearly, what these places have in common is that they are all world-class cities with open financial systems, reliable forms of governance, efficient legal systems that offer living environments with rich cultural and entertainment facilities.

These are essential ingredients to attract the category of people required to operate the complex operations and markets that a robust financial system would require. Would Mumbai meet any of these requirements? Clearly not. Even if we were to aspire to be a regional financial centre, we would have to take on the infrastructure that Dubai, Singapore and Hong Kong offer today. Mumbai is in a state of extreme decay.

Its infrastructure is broken. We cannot aspire towards 24 hours of clean and reliable water supply. We have woefully inadequate sewerage and waste disposal, a creaking transport system and limited connectivity. Governance systems are conspicuous by their absence while anarchic political practices prevail.

Why are we prepared to ignore both the competitive and comparative advantage we possess in terms of location, quality of human resources, and indeed leadership, in financial services throughout the world, and not least in the very financial centres that compete with us? Why, indeed, are we willing to consume financial services in competitive locations done by Indians for Indians in international destinations because these services are not available at home? And why do we persist in destroying the city that sustains us and could be a truly global city? The answer lies in the lack of three concepts: caring, leadership and governance.

We need to care to do something first - set ourselves clear objectives, the means will follow. We have no such clarity. Caring is the first ingredient of leadership. Effective leaders care. Our governance systems are the relics of an era long abandoned - something I call "Sovietism". We are littered with "parastratal" organisations, undemocratic city practices, development plans that mean nothing for the future of the city but rather are designed for rent seeking by those empowered by rules. Globally, major, successful cities are run by mayors - either appointed or elected by their citizens.

India does not seem to believe in this principle, for cities at least. Are we really likely to be able to offer both competitive and comparative advantage for Mumbai to emerge as a regional financial centre? I hardly think so. We have all the potential for this role if we care to achieve it. But do we care? Do we have the leadership this will require? Above all do we believe in governance for the people by the people? Our starting point needs to be to govern Mumbai considerately for its citizens. The rest will follow.

- The writer is the Chairman of Development Credit Bank and Former MD of IDFC