GFCI 8 and a Forgotten Report

The Global Financial Center Index (GFCI) is a composite index that provides relative competitiveness of 75 financial centers across the world. It is a bi-annual report published by Z/Yen group, based out of London, with the support of the City of London Corporation. First published in 2007 the index covered only 46 centers. Slowly it has increased its ambit to 75 centers. 

The GFCI is computed using both quantitative and qualitative factors. The quantitative factors or the instrumental factors, as the report calls, have their base in secondary data sources. Many reports like that of the World Bank, Transparency International etc are used to cull the instrumental inputs. The qualitative inputs are obtained from international financial executives through an ongoing online questionnaire-based interview. The recent report is based on more than 33,000 responses from more than 1,800 professionals. The rating model has undergone substantial qualitative up-gradation.

The recent report has a few surprises. London is rated as the best IFC this year. Well, this is not the surprise I just said.

It is Asia where all the action is happening. 4 out of top 10 IFCs and 7 out of top 20 IFCs are Asians cities and this is a jaw-dropping record. Hongkong at 3rd rank leads the Asian contingent. More jaw-dropping for you. Hongkong is just 10 points ( on a 1000-point scale) away from London and New York from becoming the world's best IFC. More interestingly 4 of these top 7 Asian centers are Chinese cities. Hongkong was third ever since the GFCI was published. But since the first version of GFCI, Hongkong has steadily narrowed down the difference between the traditional financial centers and itself. It should be a very interesting experience if one sits down to study how Hongkong has been able to unleash this onslaught on the Goliaths of the financial world.

Hongkong Stock Exchange

In this Asian buzz, I really felt impelled to search where is my city, that is Mumbai. Though I do not live in Mumbai, it is the only promising star of our country. Glancing through the rank-list of cities for Mumbai's name reminded me of searching for India's place in medal's tally in some Olympic event. Mumbai stands there at 57. Politico-economic pundits claim that it will be India and China that will drive the whole world in the near future. While China has 4 cities in the top-10 list, India is struggling to hold its fort at 57. This state of affairs means some serious introspection  is needed. Now I get reminded of an almost forgotten report titled 'Making Mumbai an International Financial Center'. This study was commissioned by the Ministry of Finance in 2007 and the report was drafted by a group of eminent experts like O.P.Bhatt, K.V.Kamath, C.B.Bhave, Aditya Puri and the likes.



NSE with its state-of-art technology holds a key
for the success of Mumbai as IFC



Already Mumbai  has a place in international finacial services trade. But they are largely  BPO kind of services. The report is very ambitious and wants Mumbai (read as India) to cater to the international market with genuine International Financial Services. To render truly international services what we need is something substantial. Human capital, state-of-art IT and telecommunication systems, well-connected financial systems and a favourable politico-legal environment. There are many areas where we need to catch up with international standards. Areas such as banking reforms, capital account convertibility etc require urgent attention. There are certain things which makes us very unbecoming of an IFC. The recent turf war amongst the major financial sector regulators is a point in view. While cleaning dirty linen in public clearly tarnishes our image, it also creates doubts in the minds of international financial entities regarding the regualtory system in our country. May be it is time that we mull over the idea of an unified financial sector regulator.

When the government wants to make Mumbai as an IFC, there were some voices as to why not Kolkata as an IFC. Gujarat's Chiefminister Mr.Modi even unveiled a plan to make Ahmedabad as an IFC. Well that is very interesting. Competition is a definite welcome, but at this stage when India is not yet an established player in the international market, there is a compelling need for all of us to concenterate our efforts and bet on Mumbai as an IFC. All the parochial, vested interests may be exploited on electioneering planks and not on business platforms. Hope soon this forgotten report is dusted and read by the people who can play a role in realising this momentous dream.