Year 2017 is the 10th anniversary of Report on Making Mumbai as International Financial Centre : What a cruel reality check…

As Mumbai goes through another deluge and crisis, you begin to wonder how superficial nature of our urban development. The maximum city does not even have minimum facilities in place.

It is not just Mumbai but we have had this water logging problem in most cities this season. We had floods this year in Ahmedabad, Bangalore and many more regions. And of course there was Chennai too in 2015 (though Chennai went to another extreme of water shortage soon thereafter). More summary here.

One sticks to Mumbai in this post given the coverage.

It is a really cruelty check as this year of 2017 marks the 10th anniversary of much hyped and debated Report on Making Mumbai as International Financial Centre. There was this whole feeling around 2005-07 just before the crisis, that India is not doing enough to attract global finance. This led to multiple reports around the time each one asking India to be more open on global finance from its own angle.

This specific report looked at how Mumbai could become an international financial centre and compete with others in the business like New York, London etc.  After all the committee was formed as then Finance Minister in his 2005-06 budget speech said:

Mumbai – A Regional Financial Centre
90. When I look at the map of the world, I am struck by the strategic location of Mumbai. It lies almost midway between London and Tokyo, two nerve centres of world finance. Mumbai is also home to the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) which now rank no.3 and no.5 among the stock exchanges of the world by the number of trades per year. In the last  decade, we have built world class institutions on the securities markets and we now compare with the best in terms of technological sophistication, risk management and sound governance. I believe the time has come to begin work on making Mumbai a regional hub for finance. In consultation with the RBI, I propose to appoint a high powered Expert Committee to advise the Government on how to make Mumbai a regional financial centre.

This was followed by a budget speech in 2007-08 where he said:

Mumbai as a Financial Centre
101. The High Powered Expert Committee to make Mumbai a regional financial centre has submitted its report recently. I intend to place the report in
the public domain and obtain feedback. It is my hope that we would be able to build a consensus on the key recommendations of the Committee, promote a world class financial centre in Mumbai, and realise the objective of making ‘financial services’ the next growth engine for India.

It is interesting that this ambitious committee was floated despite the Mumbai floods in July 2005. Instead of looking at how to prevent Mumbai from flooding, we were more interested in making it an international financial centre. Perhaps the thinking came from financial sector itself where you give these extreme financial risks really low probability of happening. Similarly, one thought such a cloud outburst was a very low chance event and has already happened. It is not going to happen anymore, so why care. But just as we see in finance as well, these evets have fat tails and are hardly as low probability events as we think. Thus, just like financial crisis are far more common so are bad weather outcomes.

Thankfully, the committee report had suggested that Governance of the city is the biggest risk towards making Mumbai as a financial centre:

The quality of municipal and state governance, the provision of personal security and of law enforcement, will need to improve dramatically from
third-world to first-world standards to accommodate an IFC. That is likely to prove the greatest challenge of all.

The committee had suggested “a city government with the necessary autonomy, accountability and power to provide local public goods in Mumbai in a reasonably unfettered fashion”. This obviously was the most controversial of all suggestions and was hugely criticised back then.

As work was beginning on these ideas. came the global financial crisis in 2008 and all these ideas were caught in a trap. We were then told that thankfully we did not implement most of these “global finance ideas” that we were saved. Heads I win, tales you lose.

But then gradually as crisis receded, we started to move towards global finance ideas and centres again. This despite the fact that both global finance and global financial centres were badly impacted by the crisis. But somehoe this global finance lobby is so strong in India that it keeps coming back.

Some euphemism was used as there was a Finance Ministry paper on Global Financial Special Economic Zones. This led to discussions over IFC vs SEZs ignoring that neither have really worked..

GIFT city in Ahmedabad/Gandhinagar Gujarat became the first international financial centre. This was followed by Maharashtra Government announcing Mumbai to be the second IFSC. The Maharshtra CM even connected the Mumbai IFSC to a Bullet Train making it all look really fancy and global as they say. Articles started appearing on Ahmedabad vs Mumbai in the IFSC space and so on.

And come these rains in 2017, both the IFSCs have collapsed. It has again come as a reality check that we as we talk of making everything smart and international, we do not even have basics in our cities. One can ignore Ahmedabad as it hardly gets as much rain but rains and Mumbai are a constant. To see pictures of Bandra Kurla complex completely submerge in water (on whatsapp groups) was such a crude reality check for the land projected as a site for IFSCs.

It beats you how come no one asks this question when all this talk of IFCs etc start to build – How sure are we that the city will not be flooded when the next rains hit?

We conveniently forget in all these discussions that all these IFSCs/international cities are first livable cities with basic facilities. It was over these facilities that financial services got built and not the other way round. But anything in finance and international at that is cheered by the huge lobby with headlines screaming: Mumbai closer to London/New York etc..But then nature keeps serving these constant and rude reminders that we are no where close and are perhaps drifting farther…




One Response to “Year 2017 is the 10th anniversary of Report on Making Mumbai as International Financial Centre : What a cruel reality check…”

  1. vikramml Says:

    We are a cargo cult country.

    From Feynman:

    “In the South Seas there is a cargo cult of people. During the war they saw airplanes land with lots of good materials, and they want the same thing to happen now. So they’ve arranged to imitate things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas—he’s the controller—and they wait for the airplanes to land. They’re doing everything right. The form is perfect. It looks exactly the way it looked before. But it doesn’t work. No airplanes land. So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land.”

    All our institutions are like this. The structure is copied from the west but there is not much depth inside.

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