India’s effort to be a global financial hub has lost its momentum: Ashok Chawla
We lost the momentum in the last 9-10 years because of the global financial crisis.
Within Asia, Hong Kong has lost much of its competitive edge over the years as Singapore beat it in the race.
But it remains a long shot for India’s financial capital Mumbai, which has over the years dreamt big and done too little to even be in the recknoning.
“We lost the momentum in the last 9-10 years because of the global financial crisis. Political factors, too, caused a lot of volatility,” Ashok Chawla, NSE Chairman and former finance secretary, told an elite gathering at the ETMarkets Global Summit in Mumbai on Thursday.
The National Stock Exchange (NSE) last month caused a ripple in the global financial markets when it announced withdrawal of licence for Nifty futures trading on the Singapore Stock Exchange. Overseas portfolio investors use these future contracts to hedge their exposure to the Indian market.
GIFT City, which aspires to take on Asian financial hubs from Prime Minister Narendra Modi’s home city Ahmedabad, is seeking to draw these FII money by launching a proxy contract on its platform.
India, Asia’s third-largest economy, is fast gaining clout in the global economic order and is being projected to become the world’s fifth-largest economy in a few years. A large young population, booming domestic consumption, a fast-expanding economy and a relatively steady and accommodating policy environment are making multinationals and financial giants to draw up big plans for this market.
“Any country or city that aspires to be a global financial centre must be a robust economy,” says Chawla. “Be it London, Frankfurt or Tokyo, these financial hubs were all anchored in strong economies. We are moving in that direction, but are not there yet,” he said.
Meanwhile in Mumbai, the Maharashtra government is chalking out plans to make another big push to earn itself the pride of place.
Chawla is hopeful that by 2030, India and China would be important centres in terms their return on investment and shares of global savings.
By 2030, India is projected to contribute 7 per cent of global savings, from 3-4 per cent at present.
“Our laws, regulations and institutions must be of global standards; this is the second pre-requisite to be a global financial hub. We often falter on this count. Our institutions or economic architecture is still not of global standards,” he pointed out.
All instruments need to be liquid, and they need to have more and more foreign participation, Chawla insisted.
Later, talking to ETMarkets.com on the sidelines of the event, Chawla said he is optimistic that the NSE will be able to launch its IPO in FY19. He noted that the matter related to the co-location case has still not been settled. “Once that is settled, we are geared up to go for the IPO,” he added.
Asked if there would be some proxy contracts to replace SGX Nifty futures trading on the Singapore Stock Exchange (SGX), the NSE chairman said discussions were on between the NSE management and the Singapore authorities and it would be premature to give any indication at this stage.
On NSE’s overseas ambitions, the NSE chairman said the exchange is competent and equipped to move to other markets. "It is exploring viable propositions elsewhere. Generally, they come through a transparent bidding process. Whenever we feel it is appropriate, we will go for it,” Chawla said.