Expert committee calls for IFC in Mumbai

New Delhi, Apr 2 (UNI) Citing that the demand international financial services in the country is set to grow to up to 70 billion dollars from the present 13 billion dollars, a high powered expert committee has suggested establishment of an international financial centre (IFC) in Mumbai.

The Committee in its report submitted to the government has set an agenda for setting up urban infrastructure and governance in Mumbai, in the context of making it a hospitable global city for a large and demanding expatriate population that will be indispensable in the succesful operation of an IFC.

Most financial services are internationally tradeable and termed as international financial services' (IFS). In India, Mumbai has been the hub of almost all the major developments in the financial sector. Moving towards the export of financial services from India is synonymous with developing Mumbai as an IFC, the report said.

The strategy proposed in the report for achieving an IFC comprises of ten elements which includes reducing the debt/GDP ratio, and reforming the monetary policy regime, new approaches on public debt financing, creation of the Bond-Currency-Derivatives market nexus, financial market integration with a shift away from the existing segmented approach, shift from the present over-prescriptive rules-based regulation towards principles-based regulation, capital account convertibility, reforms to taxation of IFS and financial transactions, inducing greater competition and innovation, improving the performance of the legal system and opening up to IFS support services infrastructure.

The report envisages a first phase (2007-2012) where Mumbai connects India's financial system to the world's financial markets.

This will mimic what IFCs like Frankfurt or Tokyo do for their respective national economies. In the second phase (2012-2020), the committee recommends that Mumbai must develop the capacity to join London, New York and Singapore as one of the premier IFCs of the world.

The report identifies six advantages that India has in establishing an IFC including hinterland advantage, human capital, better location, democracy and rule-of-law, mindshare and strong securities market.

''These advantages imply that India has a superior starting point on the movement towards export of financial services, compared with the nascent beginnings of software export from India. However, the committee has identified two classes of constraints which hold India back. They lie in the areas of financial sector policy and urban economics,'' the report said.

The final area where a great emphasis is called for is the task of bringing Mumbai up to world standards of urban infrastructure and urban governance, so that it attracts the best and brightest immigrants from all countries of the world.

UNI