MUMBAI: A young chief minister with a management degree, a prime minister who wants to make India noticed on the global stage and a regulator who knows international finance like the back of his hand. This could be just the right combination to make Mumbai’s dreams of becoming an international financial centre (IFC) a reality, although sceptics abound.Maharashtra’s new chief minister, Devendra Fadnavis, wants to have 10 more business districts similar to the Bandra-Kurla Complex in Mumbai, besides building highways and railways like those in Japan (or China) and elevated corridors to cut through congestion. All this may breathe new life into the seven-yearold plan to make Mumbai a global centre for financial services.Other centres in Asia may be losing their shine—Dubai is surrounded by geopolitical chaos and Singapore is apparently turning less attractive to expatriate workers due to slowing economic growth—marking an opportunity for Mumbai to aspire to that regional position.“If Dubai could do it in a few years, why can’t India?” said Arundhati Bhattacharya, chairman, State Bank of India. “There is no reason why we cannot do it. India has a lot of talent to do that. What we need is better infrastructure.”A committee headed by Percy Mistry made suggestions in 2007 on how to turn Mumbai into a financial centre but the credit crisis soon after dampened enthusiasm as global markets collapsed. With new incumbents— in the administration as well as the regulator—the idea is being revived.London, New York, Hong Kong and Singapore are considered global financial centres as fund managers, wealth advisors and banks choose to base themselves there due to the ease with which they can move capital across the world, apart from physical infrastructure.These cities also attract the best talent from across the globe due to stable regulatory and tax structures and the freedom to innovate.In India, only Mumbai can possibly be such a base, but physical infrastructure and the regulatory structure have a long way to go.“Mumbai offers a much better culture for financial services than other cities in the country,” said Jaideep Khanna, country head at Barclays, a British bank. “It has a cosmopolitan culture. What Mumbai severely lacks is infrastructure. Singapore invested in infrastructure and created the conditions for people to live.”Mumbai has buildings at BKC and elsewhere that may meet global specifications but otherwise it’s far removed from locations such as London’s Canary Wharf business district. The Mumbai Metropolitan Region’s population is the second highest in the world after Tokyo and the suburban population density is double that of New York, but residents need to negotiate narrow, crowded roads and suburban train travel times of up to four hours a day. The monsoon season brings added disruption.The new chief minister wants to speed up approvals for the industry. “The financial services will benefit if we give a single-window clearance for all the permissions they need from the state government in MMR region,” Fadnavis said. “This will be another priority area for me.”Fadnavis also promises to transform the city’s infrastructure. “My agenda for Mumbai has a two-pronged approach. One is to develop more space for commercial purpose as well as housing purpose and second is to improve the public transport structure in the Mumbai Metropolitan Region (MMR) so that workers and executives from private and public sector can function more efficiently,” he said. “Commercial spaces must be developed for business and financial services sector so that the lease rates become affordable.Only one or two new central business areas have been developed in the last 20 years. There is a lot of scope to develop more such areas in the MMR region.”He also wants to slash commute times drastically. “I am going to push for the trans-harbour link which will connect Navi Mumbai to south Mumbai.”Also, financial centres allow unfettered currency trade and movement of capital at will, which India doesn’t permit.For full convertibility of the rupee, the Indian macro economy has to become more stable.Besides, inflation and fiscal deficit need to moderate from current levels. Modern financial products such as derivatives trading in currencies, bonds, credit default swaps are all tightly regulated currently in India.“The regulations will have to have the right framework to welcome necessary products,” said SBI’s Bhattacharya. But any relaxation in the rules may be difficult, given that recent developments have given financial innovation a bad name.“It is still premature to talk about it,” said a member of the Mistry committee, who did not want to be identified. “We are not there yet to go for capital account convertibility. The philosophy is inapplicable today.”The Mistry committee had laid out a schedule in its report. In the first phase, 2007-2012, Mumbai would link India’s financial system to the markets of Frankfurt, Paris and Tokyo, which are not full-fledged global centres. In the second phase, 2012-2020, Mumbai was to develop the capacity to compete with London, New York and Hong Kong for international financial services business beyond meeting India’s needs.“Over the decades, India has built up a licence-permit raj in finance,” said the report. “It over-emphasises compliance at the expense of competence, competition and innovation in financial services. A similar raj dominated the real economy since independence. But it was dismantled during the 1990s to the immense benefit of the Indian economy and particularly Indian global competitiveness.To achieve the same objectives, that raj in finance now needs to be dismantled if India is to develop IFS (international financial services) provision and export capabilities and if an IFC is to emerge in Mumbai.”Regulatory aversion to fancy financial products and the need for near-constant oversight of trading activities have kept the market small. With Raghuram Rajan as Reserve Bank of India governor, that may change.“This might be a strange time to talk about rupee internationalisation, but we have to think beyond the next few months,” Rajan said at the peak of the currency crisis last year. “We intend to continue the path of steady liberalisation.We cannot create depth by banning position taking, or mandating trading based only on well-defined ‘legitimate’ needs. Money is fungible, so such bans get subverted, but at some level, all investment is an act of faith and of risk taking.”Even if Fadnavis delivers on his pledge to build infrastructure, it won’t be possible to turn Mumbai into an international finance centre unless RBI and the central government can create an atmosphere of stable and light regulation in a short span.“The road to financial innovation in the 21st century cannot be travelled at any speed by regulation that results in India’s financial firms remaining the equivalents of antediluvian Ambassadors and Fiats in India’s financial services industry when the rest of the world is using BMWs and Ferraris,” said the Mistry panel. “Every year, the gap between Mumbai and London is growing, not narrowing.”