Battle’s Brew­ing Over Int’l Fi­nance Cen­tre

The Economic Times - - Front Page - Ad­van­tage A’bad Mum­bai’s Legacy

Su­gata Ghosh & Kr­ishna The­var

Mum­bai: The race and lure to set up In­dia’s in­ter­na­tional fi­nance cen­tre is fast turn­ing out to be a tale of two cities – Ahmed­abad and Mum­bai – and sub­tle politics play­ing out around the two western busi­ness hubs.

At a re­cent meet­ing with fi­nance and com­merce min­istry of­fi­cials, man­agers of Gu­jarat In­ter­na­tional Fi­nance Tec-City (Gift) – the spe­cial eco­nomic zone near Ahmed­abad – said it would be against global best prac­tices to have a sec­ond off­shore fi­nan­cial cen­tre in a coun­try with partly-con­vert­ible cur­rency, a per­son fa­mil­iar with the dis­cus­sions told ET.

The con­cerns voiced by Gift come at a time the Ma­ha­rash­tra gov­ern­ment is try­ing to cob­ble to­gether a plan with se­nior bankers to carve out a slice of Mum­bai, In­dia’s fi­nan­cial cap­i­tal, as a global fi­nan­cial ser­vices cen­tre that would over the years com­pete with Dubai and Sin­ga­pore.

Gift au­thor­i­ties fear that two fi­nance cen­tres would not only be un­vi­able, but could also con­fuse in­vestors. “Be­sides, the worry is if Ma­ha­rash­tra is given per­mis­sion, it would be dif­fi­cult to refuse other states. Even if the law al­lows, mul­ti­ple cen­tres could be a su­per­vi­sory

the first state to make a se­ri­ous ef­fort to set up a global ser­vices and fi­nance dis­trict – hav­ing ap­plied in 2010 and re­ceived the cen­tral ap­proval a year later


has re­cently stepped up ef­forts to set up a global fi­nan­cial ser­vices cen­tre in Mum­bai.


MUM­BAI HAS the legacy, be­ing the fi­nan­cial cap­i­tal of the coun­try. chal­lenge for reg­u­la­tors like RBI and Sebi,” said a gov­ern­ment of­fi­cial who at­tended the meet­ing where of­fi­cials of the state-con­trolled Mum­bai Metropoli­tan Re­gional Devel­op­ment Au­thor­ity were also present.

Dur­ing its four-month jour­ney, mon­soon de­liv­ers 75% of the coun­try’s an­nual rain, ir­ri­gates parched fields and re­plen­ishes de­pleted reservoirs for hy­dropower gen­er­a­tion apart from feed­ing canals. A good mon­soon will also help keep prices in check and en­cour­age the Re­serve Bank of In­dia to main­tain its ac­com­moda­tive mone­tary pol­icy stance. The ex­pected heavy rain­fall will end the wa­ter short­age in many parts of the coun­try, par­tic­u­larly Ma­ha­rash­tra and parts of south­ern In­dia, where reservoirs have hardly any wa­ter left, although it will take a few months to ease the sit­u­a­tion. IMD Di­rec­tor-Gen­eral LS Rathore said drought-hit parts of Ma­ha­rash­tra will re­ceive good rain­fall.

Heavy show­ers will also boost de­mand for scoot­ers, mo­tor­cy­cles, small cars, ice-creams, con­sumer goods, trac­tors and farm equip­ment, which has been hit by fre­quent mon­soon fail­ure in re­cent years. Rathore said the years ahead would be bet­ter. “Sub­se­quent to this year, there will be more num­ber of nor­mal (mon­soon) years,” he said.

IMD said there is a 94% chance that the mon­soon will be nor­mal or sur­plus. Rathore said the prob­a­bil­ity of ex­cess rain­fall was 30%, which will help fill up reservoirs faster, although this also raises fears of floods. De­tails on the on­set of the mon­soon, tra­di­tion­ally in the first week of June, will be pro­vided in the next forecast in the third week of May, af­ter which the Met de­part­ment will up­date its out­look. growth should come back on track and we should tar­get to touch the 2013-14 food­grain pro­duc­tion fig­ure of 263 mil­lion tonnes from the 252 mil­lion tonnes we are tar­get­ting in 2015-16,” he said. Amul Man­ag­ing Di­rec­tor RS Sodhi was op­ti­mistic. “This sum­mer sea­son we ex­pect 25% growth in ice-cream sales over the pre­vi­ous year, which was around Rs 1,000 crore,” he said.

The pulses crop is likely to ben­e­fit the most from a good mon­soon, said Pr­erana De­sai, vice-pres­i­dent, Edel­weiss Agri Re­search. “Grain, cot­ton and oilseeds have not given at­trac­tive re­turns to farm­ers in the last sea­son, so we ex­pect plant­ing of pulses to see an in­crease,” she said.

The forecast will boost in­dus­try sen­ti­ment as re­vival of ru­ral de­mand leads to a turn in the in­vest­ment cy­cle, said Con­fed­er­a­tion of In­dian In­dus­try (CII) Di­rec­tor-Gen­eral Chan­dra­jit Ban­er­jee. “This would take the econ­omy to a higher tra­jec­tory of around 8% growth,” he said, adding that a good mon­soon will help bol­ster farm pro­duc­tiv­ity and al­le­vi­ate ru­ral dis­tress be­sides lift­ing ru­ral in­comes and con­sump­tion de­mand even while aug­ment­ing food sup­plies and keep­ing in­fla­tion in check. LD Mit­tal, chair­man of the Son­alika Group, said the econ­omy would pick up and so would sales of trac­tors. “Com­pared with the pre­vi­ous two years, when trac­tor and farm equip­ment sales slowed down, we should now see the sec­tor pick­ing up,” he said.


“The prospects of nor­mal mon­soon along with sub­dued global com­mod­ity prices would keep re­tail in­fla­tion within the 5% mark, which in turn should help RBI to re­tain the dovish stance to­wards mone­tary pol­icy and open up the door for fur­ther eas­ing of pol­icy rates dur­ing the cur­rent year,” said CII’s Ban­er­jee. Last year, the mon­soon was14% be­low nor­mal while in 2014 it was 12% in deficit. The dis­tri­bu­tion of rain­fall was also er­ratic as the desert re­gion of Ra­jasthan had ab­nor­mally high rain­fall while agri­cul­tur­ally im­por­tant re­gions had a big­ger deficit than what is re­flected in the over­all data.

Agri­cul­ture ac­counts for 17% of In­dia’s econ­omy and more than half the coun­try’s pop­u­la­tion de­pends on farms di­rectly or in­di­rectly. Agri­cul­tural growth can touch 6% in 2016-17 if the coun­try re­ceives nor­mal mon­soon rains this year, Niti Aayog mem­ber Ramesh Chand has said. He had said that higher growth was recorded af­ter the drought years of 2003-04 and 2010-11. Chand said agri­cul­ture growth in 2015-16 is ex­pected to be 1.2%. In 2014-15, it stood at -0.25%. “The growth will be over (that in) 2013-14. It hap­pens in agri­cul­ture that growth some­times fall to -0.5%, and some­times touches 15% growth rate,” he said.

La Nina in Span­ish means ‘the girl’ and it is caused by an ab­nor­mal cool­ing of ocean tem­per­a­tures in the Pa­cific re­gion.


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