Large-scale protests. Ruthless repressions. A draconian law. Hong Kong’s relationship with the world has been completely disrupted by China after it imposed a new national security law on June 30, undermining Asia’s main financial center.
In the fast-paced world of business and finance, the fight to replace Hong Kong is already underway, and India’s financial capital Mumbai could take advantage of its rival’s problems. “It appears that Hong Kong’s independent institutions, including the courts and the central bank, will be affected in the future,” said Pranay Singh, economic research analyst at GlobalData. “This affects its image as a business center.”
The talk of making Mumbai a global financial giant is not new, but a small effort has been made to make that dream come true. While cities like Singapore and Tokyo appear to be ahead of Mumbai in the race, some experts think that India’s financial center has certain advantages and main structures to compete.
“We are home to some of the big industrial houses (domestic and global) and the main financial institutions. Our central bank is one of the most trusted regulators, ”said Manjeet Kripalani, co-founder and CEO of the Mumbai-based expert group Gateway House. “In addition, the city has the oldest stock exchange in the world and a commodity market.” The city can also boast a great port, he added, and is perfectly located in terms of time zone between east and west.
Crumbling streets
But Mumbai must do more. You need to carry out major radical reforms on three fronts–its business environment, infrastructure and government, if it wants to be considered a true rival to other global financial centers.
“An important consideration for the Indian government is improving the overall infrastructure and livability factor of the city of Mumbai,” said Russell Gaitonde from Deloitte India, adding that these “milder” issues are important to Indian and foreign citizens who they live and work in cities like Singapore, Hong Kong and Dubai. “The city’s infrastructure is crumbling and the quality of life in the city is poor.” The Economist Intelligence Unit’s Global Life Index (2019) ranked Mumbai at 119 out of 140 cities, based on healthcare, stability, infrastructure, education, culture and the environment.
Bumpy roads with heavy traffic and poor urban planning are some of its most unattractive features; These have been a key concern for more than a decade. A committee established by the government in 2007 made it clear that the city must solve these problems if it has any chance of becoming a major global hub.
Don’t take center stage
The committee’s recommendations to improve Mumbai were never followed up and he ended up losing a planned International Financial Services Center (IFSC) for another state in India. In addition to Mumbai’s problems, politics also played a key role: the IFSC is now in Gujarat, the home state of Prime Minister Narendra Modi.
Mumbai should have been the natural choice. “Financial services groups would prefer to establish their IFSC businesses in Mumbai, which is the financial capital of India and where most financial services groups have existing business operations,” said Gaitonde. “It would also be easier to convince Indian professionals currently working in global financial service centers to return to India and settle in Mumbai.”
Tax Reform
In addition to updating the infrastructure, Mumbai needs to provide more incentives for global companies. With its ease of doing business and reducing taxes, Hong Kong has been a safe haven for financial professionals and global funds. Its proximity to the rapidly growing Chinese economy also gave it an advantage. India’s complicated tax system has always been a problem, on the contrary.
While Singapore would be his favorite destination, Mumbai can throw his hat into the ring for a share of the $ 91 billion valued assets managed by fund houses in Hong Kong. But for this to happen, the Indian government has to introduce reforms to attract world funds.
In addition to reducing and simplifying taxes, India’s currency is uncompromising. Currently, there are certain restrictions on the purchase of foreign financial assets such as stocks and property when converting the rupee to other currencies and vice versa. “Full capital convertibility must be achieved within a time period of the next 18-24 months and before the end of the 2008 calendar,” the panel report in 2007 said.
Such radical reforms are not easy in India and have not yet been achieved, but Hong Kong’s problems may be the incentive Mumbai needs.
