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When the world will finally come out of the global economic crisis, there will be a new global financial nerve centre: Mumbai and this is no dream but a a realistic goal set by the country’s finance ministry, at a time when New York and London have lost their supremacy in consequence of the collapse of a number of Western banking giants.
According to a finance ministry official, “New York and London are facing trouble as global financial centers. Singapore faces the problem of having a large financial services centre with a small economy. Mumbai is the best suited to emerge as a global financial centre, especially because the domestic demand for sophisticated financial services is high” .
The official revealed that the finance ministry will take up 49 recommendations for restructuring the financial regulations in India once the new government takes office after the general election.
The proposals will consist of boosting innovation, introducing new products and strengthening corporate debt market. The ministry will strive to ease the regulations and make them more friendly and based on principles, remove segmentation of financial markets into banking, insurance, capital markets etc and lift the ceiling on foreign investment in Indian rupee bonds.
Economists have also given a positive response to the selected reforms in the financial sector, but said they should be backed by proper regulation.
According to the HDFC Bank chief economist Abheek Baruah, “There is scope for innovation in the local financial market. However, in the current scenario, it will be difficult to sell the idea of a complex global financial market with trading in all local as well as offshore securities - say Malayasian or South Korean securities - in India”.
The finance ministry said that though the global crisis has shaped world opinion against ‘unbridled’ financial innovation as well as exotic and highly complicated products designed by mathematical wizards, however, that does not mean innovation is bad.
The finance ministry official said further,“Speed driving may cause accidents. Not building highways is not the answer for that. Strict regulation is not necessarily against innovation”. The Economic Times
April 2, 2009
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