Archive for May 7th, 2007

Mumbai as an International Finance Centre…you must be joking?

May 7, 2007

It is actually amusing that people of high calibre keep coming out with such fascinating, visionary and fancy reports (pun intended). But this one on Mumbai as an International Finance Centre is the outright winner. Initially the report could only be bought, but now it is available for a free download. Number of articles on the same is maintained by Ajay Shah (a consultant to the report)

MIFC report is clealry a fancy idea. I think Mumbai first needs to be made a better city to live before it can be made into an international (whatever..) centre. It has too many challenges in terms of basic infrastructure. It is one thing to stay in South Mumbai (read Nariman Point, Malabar Hill, Napean Sea Road etc) and travel to work in the same nearby areas and it is a different thing to travel from a suburb in Mumbai (Western, Central, Harbour etc) to work anywhere in Mumbai (except for the suburb they stay in).

Navi Mumbai which used to be a relatively neat and clean place just 2 years back ( the time I came to Mumbai) seems to be becoming a pain to live in. All roads are extremely crowded and the place is full of cars, 2 wheelers etc. (Some people call this development, I really do not think so). I was reading the other day that

Navi Mumbai was suppossed to take the pressure away from Mumbai and it was expected that many people staying in Mumbai and coming to Mumbai would relocate/stay in Navi Mumbai. It currently has a population of something like 14 lakhs and it should have been 20 lakhs some few years ago.

I cant even imagine what will happen if the population was 20 lakhs with the current state of roads and infrastructure.

I would guess for Mumbai to become an IFC, it is important that the best talent (trained in financial markets) comes to Mumbai to work. As long as the advocates of the IFC can provide accomodation to the talent in and around South Mumbai (where most of the fiancial industry is housed), it is fine otherwise it just remains an idea.

I would suggest they should look at basics first. Have most of the committee members experienced what it is like to search for a apartment in Mumbai? Not just the rents are sky-high, but one cannot get anything without a broker’s help. And then you need to pay the broker 2 months of rent as his fee. With just a 11 month agreement you end up doing the same job every year. With local trains the only way one can commute, most need a house near the railway station. So you see, the basic need which is a house is itself so complex. Why can’t we have a better system of renting apartments in Mumbai?

The same concerns are even mentioned in Ajay Shah’s blog to which he answers: “Mumbai becoming unlivable: Could it be that some other city in India could become a financial centre? I am really confused by this approach, You want to make Mumbai an IFC just because no other city in India can become one?

Assorted Links

May 7, 2007

1. Dani Rodrik continues to impress me by his ideas on benefits of trade. I agree completely to his viewpoint that trade theorists assume many things while advocating benefits of trade.

The theory is all fine but when the implementation of the same comes it has not really worked. Like for instance the theory says opening up trade in developing countries benefits consumers as we get better products.  But is that all? What about the labour that works in those industries. To assume they would relocate to other productive industries is too much of a blond notion.  In developing countries, the labour is generally not very well trained to do other jobs and only know the work related to the industry they have been working on. Plus, most of them have learnt the skills not at some school but from parents/relatives etc. So, it is all the more difficult for them to move to the other industry as mostly stated in textbook economics.

This is not to undermine the theory at all, but to point out the fact that reality is quite different.

Read Alan Blinder’s negative view on Off-shoring. His take is 30 million to 40 million U.S. jobs are potentially offshorable which could have serious consequences for the economy as transition is going to be difficult. His arguments are not really convincing ( and I need to read more on this) but if someone can talk of transition becoming difficult for American workers imagine the plight in developing economies.

2. Take the Rodrik poverty quiz. Very interesting…

3. Longest Bull Run in 80 years!

4. Check out the all new website of Economic and Political Weekly ( a leading journal on Socio-Politico-Economic issues in India). It has become much better and would also feature a blog discussing the top 4 issues in every issue.  

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