So, there is the general critique of India’s financial sector development that shows how the walk from financial repression to financial freedom under which Mumbai can function as an IFC is a path full of devils and ghosts that we, the children of liberalisation, felt had been laid to rest in the tombs of history to be studied, analysed and avoided like the plague. Not so, says the report. Talking to lawmakers, the report notes that if Mumbai has to become an IFC, conflicts of interest that RBI manages and public sector ownership of financial firms through “balance sheet and profit-loss protection as well as high barriers to entry and competition and the resultant suppression of financial innovation” have to end (in other words, amend the Banking Regulation Act).

How? By permitting unrestricted entry of well-known global legal and accounting firms, creating an International Financial Services Appellate Tribunal covering all of finance, creating the BCD nexus, so that global investors can trade across the arbitrages that these markets present seamlessly. In the absence of this nexus, the report notes, no city can become an IFC. The other idea unions would object to is for finance ministry to allow consolidation of Indian banks and financial services to attain $500-billion strong balance sheets. In asset management, the report recommends, rightly, that the government should allow the emergence of wholesale asset management business (regulated by Sebi) such that banks, insurance companies, mutual funds, pension funds, and so on, don’t need to undertake ‘uneconomic’ operations. As many heads of mutual funds and insurance companies have told me, scale economies are the lesser problem, it is finding talent that’s killing.

... contd.