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Mumbai a global financial centre? Of course!
T Thomas in New Delhi
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April 27, 2007

Mumbai is not seen to be controlled by New Delhi just as New York is not seen to be controlled by Washington.

Mumbai is the financial capital of India. It has the two largest Indian stock markets. The Reserve Bank of India and the Securities and Exchange Board of India's head offices are located here. Almost all major banks have their headquarters in this city.

When the British Crown got this island from the Portuguese as part of the dowry of Catherine of Braganza, when she married King Charles II, nobody saw any great future for this desolate string of islands. The discovery of a protected deep sea harbour changed the perception and the East India Company bought this island from the crown and shifted its Western India headquarters from Surat to (what was then called) Bombay. That was about three and a half centuries ago.

Since then this city has emerged as a major financial hub in the global chain of financial centres. Mumbai's location is eminently suitable for day-long trading across time zones. The time difference is three and a half hours with respect to Tokyo (Tokyo is ahead because it is to the east), four and a half hours with respect to London and nine and a half hours with respect to New York (London and New York are behind us).

At 6 pm in Mumbai, it is 1.30 pm in London and 8.30 am in New York. Most people in the financial sector in Mumbai start work after 10 am (when it is 1.30 pm in Tokyo) and are at their desk till 6 or 7 pm. So the time zone is a perfect fit.

The other major advantage of Mumbai is the culture and skills of people from Gujarat, who are experts in stock trading. They are sharp minds and can react instantaneously to bids and offers. Their cost of operations is among the lowest in the world. Plus, their lifestyle is simple -- no smoking or drinking, mostly vegetarian, and fully immersed in their trading activity. The success of New York as a financial centre is partly based on similar traits among the Jewish people, who are a significant element in New York's financial world.

A major feature of Mumbai is that although it is the capital of Maharashtra and Maharashtrains form the dominant part of its population, it has managed to retain its composite culture -- a mixture of religions, languages and customs. Whether you are from UP or Tamil Nadu or West Bengal or Kerala, you will find your culture strongly in evidence. It has a very active trading community of Muslims, and a largely education-oriented community of Christians, who manage a number of outstanding schools and colleges. As you drive along Marine Drive, you will pass, on one side, several cricket clubs, representing different communities -- a Catholic Gymkhana, a Parsi Gymkhana, a Hindu Gymkhana and an Islam Gymkhana. For more than a century these Gymkhanas have played cricket matches against one another and lived in harmony as neighbouring clubs.

With a home market in India of trillion-dollar GDP, India is today one of the most promising territories in the world for an investor.

When the rupee becomes fully convertible in the foreseeable future, there will be a major step-up in the scale of investment at the Bombay Stock Exchange as foreign investment institutions, with their huge financial resources, can be expected to make a beeline for Mumbai. Unlike Shanghai, Mumbai offers the protection of a Western-type legal system, which is ultimately one of the most significant requirements of an investor.

All this has been possible because Maharashtrians are by and large more tolerant of other linguistic groups than corresponding dominant linguistic groups in Kolkata or Chennai. That is why in the words of a well-known School song, the city has been described as "the Gateway of India, a door of the East with its face to the West"! In this evolution of the city the Parsis, who are the smallest community in India, have played a very significant role. They came to India fleeing the persecution by Muslims who conquered their homeland in Persia. They were able to find a peaceful and tolerant home on the west coast of India and made it their home. Along with the British they thrived on the opium trade with China. Great fortunes were made from sending opium to that country. Looking back it is an irony that the commercial capital of India was built by exploiting an addiction of the Chinese people.

What needs to be done to make Mumbai even more attractive is to provide more residential accommodation and faster transport to the southern end of the city (Nariman Point), which is the Manhattan of India. A bridge across the harbour is one of the most effective means of achieving this. If such a project is opened up for private sector investment with reasonable terms of tariff for its use, it can attract domestic and international capital as the risks are limited and the scope can be enlarged to include better residential townships near the mainland terminal. What it needs is the leadership of an individual who has the vision, standing and credibility. Someone like Sharad Pawar could take up this task. Local leaders like Murli Deora could assist him.

The Centre, on its part, can accelerate the process by allowing foreign institutional investors to play a bigger role in the stock market investments in India. Institutional investors do not interfere in day to day management and therefore the nationality of the investor does not matter to us. The sooner we liberalise the entry of FIIs, the quicker will India benefit from the inflow of capital.

Fortunately for us, Mumbai is not seen to be controlled by New Delhi or its politics. It is like New York, which is not felt to be under Washington's control. The attitudes, motivation and outlook of the people are different in the financial capitals from those in the political capitals. Even in London, the attitudes in the City and Canary Wharf (the financial capital) are different from those in Westminster (the political capital of the UK). Mumbai is an integral part of India and of Maharashtra. Yet it seems to have retained the essential characteristic of an Island -- close to the mainland yet a distinct entity on its own.

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