India poised to become Intl Finance Centre

Mumbai, Apr 29: The global economy may shortly find Mumbai as its financial service provider which is fast adjusting itself to better its prospects as an international financial centre (IFC), As both the emerging and frontier markets are on an agressive spell to self-accelerate the respectively domestic markets, time is ripe for Mumbai to play its part, believe experts.

The relevance of International Financial Services (IFS) is ranging from areas like company financial analysis, credit research and stock market research functions.

This apart, IFS can also be instrumental in providing services like global corporate treasury operations, global transfer pricing, global tax management and trading of financial instruments.

While the emerging markets and ASEAN (Association of South East Asian Nations) are considered as the foremost consumer of such services, chances are plenty for India also to put on the gown of global IFC, drawing support from its powerful human capital, and IT resource.

In a global perspective, the large scale cross border capital flows and curtailing capital flows has its roots since the Bretton Woods regime in mid-forties when capital controls were imposed on war-ravaged and capital-starved economies, while the question of capital account convertibility still claims unprecedented importance where financial systems with structural weakness and legacy constraints confront the irresistable aspects of globalisation.

A high powered expert committe (HPEC) constituted by the Ministry of Finance to unravel the feasibility of Mumbai as the fourth global economy after London, New York and Singapore, had the necessary yardstick for the 21th century IFCs.

With an alarming competition, the IFCs muct put themselves in stream of rapid innovation in financial products, services, instruments, structures and arrangements to accomodate myriad requirements, risks and ceaseless quest for cost reduction.

Though IFCs in some way shows homogenity with the business process outsourcing units (BPOs) or knowledge proces outsourcing units (KPOs), in operational standards, the former claims substantial difference, says the HPEC report.

''The financial processes that get outsourced under BPO/KPO operations involve low-value, low-skill tasks where the task is performed repeatitively once the protocol are put in place.

On the other side, IFS can only be provided by internationally known financial firms where the products are widely varied and include global corporate treasury operations, Global transfer, pricing , global tax management and trading of financial securities, commodities and derivative contracts in financial instruments, that, however goes out of reach of BPOs, according to former advisor to Minister of Finance Dr Vijay Kelkar, who played a key-role in formulating the HPEC.

Foreseeing the ensuring challenge, the HPEC report has set two phases for Mumbai to pass through on its progress to financial centre.

While in the former phase, the country must connect its financial system with the world's financial market through the proposed IFCs, the latter phase will see a severe competition with the already established global IFCs, which if failed to confront, may even raise questions on the quality, efficiency and range of domestic financial services offered in the country, the report says.

UNI