Bombay dreams

With Prime Minister (PM) Manmohan Singh himself convening a high level meeting in August in New Delhi to move ahead on the implementation of the High Powered Expert Committee chaired by Percy S. Mistry, the process towards making Bombay an international financial center (IFC) seems underway. Mistry, a former economist with the World Bank, had headed a 15-member committee consisting of bankers, economists, representatives from regulatory bodies, etc which submitted its report to the Government of India in April.

Percy Mistry: unshackling the system

The Percy Mistry panel had made several bold and aggressive recommendations, including a closer deadline of December 2008 towards full capital account convertibility (CAC). [Earlier the S. S. Tarapore committee had suggested a three-phased plan, bringing in full CAC by 2011 (see "Capital economist,” Business, Parsiana, October 7, 2006)]. CAC is the main tool towards turning Bombay into an IFC, leading to global firms based in Bombay offering legal/financial/investment services on the lines of those provided by firms in, for example, London, New York or Singapore. With India incorporated on a buying spree, overseas acquisitions such as the over $ 12 billion Tata Steel takeover of Anglo-Dutch giant Corus generated fees for a multiplicity of legal, banking and advisory services which went to professionals in London or Singapore rather than those based in India.

Mistry himself, however, resigned before the report was submitted to the government. "Now we have got this beautiful blueprint. We have not said that this is painless. There are some tough decisions that have to be made, some tough things that have to be done, some resistance that has to be overcome,” Mistry told Businessworld magazine, as reported on their website www.businessworld.in "I am not going to be offended that you cannot do what I am suggesting. That is not even up to me; I am stepping out of it. I have resigned essentially for a set of different reasons. And don’t ask me about that because I’m not going to talk about it.”

A major roadblock seems to be the Reserve Bank of India’s view that the deadline for full CAC could be pushed back by 10 years, as reported by The Indian Express, September 19, 2007. Advising caution, India’s apex bank noted that as short a deadline as December 2008 as suggested by the Percy Mistry panel may be pushing too much the pace of reforms.

"People like P. Chidambaram (the finance minister), Manmohan Singh, Montek Singh Ahluwalia (deputy chairman of the Planning Commission) and Kamal Nath (commerce minister) are just far too intelligent, savvy, competent to not see that this is a major opportunity. But they are constrained; they are not in an absolute majority… and facing the prospects of elections,” the website quoted Mistry. By 2025, if we unshackle the system the way the panel has suggested, India’s international financial services exports could exceed the country’s IT exports, Mistry added.

Turning Bombay into an IFC within a specific timeframe, a drive spearheaded by the PM, involves drastically revamping the city’s creaking infrastructure, to virtually redefine outdated physical/financial/legislative/administrative areas. "Don’t look to me to champion this. I agree that it should be championed… by people who believe in the city of (Bombay) and have a stake in what is going to come out of this commercially. And by a government that ought to be removing roadblocks on every single frontier where India has a chance of global success,” Businessworld quoted Mistry.