If it’s go-the-whole-hog-reforms that the report carves out as the path to Mumbai-IFC, the lobbies are somewhat inverted. Unlike reforms in the manufacturing sector which were opposed by all entrenched industrialists led by the Bombay Club, financial sector reforms today have an economic logic of their own. The playing field is levelled against Indian banks and financial institutions and services firms when, for instance, a Tata Steel acquires a Corus and in the advisory and financial services that are offered, Indian players are excluded. It is these big, big deals that Indian financial services entrepreneurs want to sink their teeth into and profit from. Last year the size of this market was around $I5 billion, it is likely to rise to $20 billion this year.

Another important proposal in this report, which is something India can adopt irrespective of whether Mumbai-IFC happens, is in the approach to regulation. In financial services, unlike in manufactured goods, regulation is embedded into the product, often it is the product — no regulation, no enforcement of contract; no service, no deal. In such a scenario, the process of regulation itself has to reform. The report recommends that the Indian financial sector regulatory approach needs to make the transition from a ‘rules-based’ regime (regulator and regulated are adversaries and antagonistic) to a ‘principles-based’ regime (non-adversarial and more cooperative). In other words, it needs to move from prohibited-until-permitted to permitted-until-prohibited.

Metaphorically, the bigger issue is this: here’s a report whose recommendations have already happened — entrepreneurs will always find a way. So, the question lawmakers and policy drafters have to think about is: do we want Indian financial services to reform in the chaotic, case-by-case way that Indian manufacturing evolved but whose exports since have grown 10-fold; do we want it to go the controversial telecom way but which today offers the most competitive prices in the world; do we want it go the free market way but under the regulatory radar like IT and ITES have and capture global mindspace, marketshare? In all three, the mode of reforms was inefficient but the results show that Indian entrepreneurs have embraced the uncertainty, the risk of going global, and profited from it. The efficient way of conducting financial sector reforms is in a systematic, organised manner that enables efficiencies, creates wealth, delivers services without angst. If policymakers choose this mode, this report is surely the way to go.