Ajay Shah has given the most comprehensive coverage here (His blog is one of the best on the Indian Financial Sector at the moment)
Though the intentions are good, and required urgently as well, especially since Indian firms are in a takeover spree this year, and a well developed financial center would enable them to raise more money for such take overs, (Like Tata Steel buying Corus, or Suzlon acquiring Repower, or even UB Group buying Whyte and Mackay ... this list can go on for ever ...)
There are a couple of hurdles for the same, (as per my view)
- For any place to be an International Center for any thing (not just financial center) the location has to be welcoming to the most talented foreigners. I am not just talking about the US or Europe. One can see London is the financial center for all of europe, while Frankfurt is not. The city of London has 1 in 3 who is born outside of the UK. Same thing can be said about New York, Tokyo, Hong Kong and Singapore. (Atleast with respect to nationalities working in the Investment Banks)
- To attract such talent just money is not an issue, but also one needs to have world class infrastructure that can attract people to migrate to such a place. Though India has a lot of talented people, I belive in the value of diversity as well as the "Wisdom of Crowds"
- The local political parties should also be welcoming enough, and not demand for job quotas, either for the backward classes, or for the local communities (i.e. sons of the soil) Right now Maharashtrians are rioting when Biharis come to give the Railways exams, I doubt people would be so welcoming to Chinese, Koreans, Japanese, Lebanese, apart from the Americans and Europeans who run the financial industry world wide
- Most importantly, in any place there needs to be some kind of certainty in the working days. Mumbai has 2 days lost due water logging during the monsoons, and has another day possibly lost due to a strike or a bandh. This would lead to uncertainties in settlements of trades.
- Most important is a captive market. Though there is a market right now for M&A advisory, and for raising Equity Capital, there is not an active Debt Capital Market, also on the asset side there is not active investor base who would be buying complex financial securites. (though we have had an informal derivatives market such as Badla, and there is a huge betting market on the monsoons)
- Another aspect of the local market is that we need to have foreign firms wanting to list their stocks on the Indian Exchanges. Indian Currency and Stocks and bonds should be traded else where. Indian Mortgages should be securitised and sold all over the world from Tokyo to Sao Paulo.
- All apart one thing which can be easily addressed is the regulatory aspect, and I hope this step is quickly corrected by the government. India surely has the manpower from the best institutions who can run such a business
Thus in my opinion, though Mumbai will definitely be a Regional Financial Center, providing the financing needs for Indian as well as neighbouring South Asian countries.
More over Mumbai has stiff competition from established centers such as Hong Kong, Singapore, Tokyo and now even Shanghai.
But frankly speaking, I hope I am proved wrong, and Mumbai does become "The Global Financial Center"