Context: As China is on a rampage in Hong Kong, Asia’s top financial centre, a race to replace it is already underway, with Singapore, Tokyo and Dubai as contenders. But if Mumbai gets itself up to speed, it may have more than just a glimmer of a chance. 

More on the news: 

  • For months, there had been signs that China would not honour its commitment to preserve the democratic freedoms of Hong Kong’s residents, a 50-year pledge made in 1997 when it got the territory back from the UK.
  • The autonomy of the island-city lay in danger after Beijing slapped it with a harsh security law recently. 
  • The new law threatens to muzzle free speech and punish anyone whose actions fall afoul of the Chinese regime. 
  • Beijing’s latest move has stunned the world, evoked another round of protests in the city, and reportedly plunged many of its finance professionals into despair. 
    • Hong kong’s basic law: For nearly a quarter century, they thrived on the “one country, two systems" paradigm. 

Opportunities for India:

  • Mumbai emerging as a global financial hub: The last time the idea of Mumbai emerging as a global financial hub animated Indian ambitions was in 2007, when an expert committee led by Percy Mistry submitted an official report on the prospect. 
  • Shortcomings: The city was reckoned to have the requisite talent pool, but was found short on infrastructure
  • Recommendations of the Percy Mistry committee: 
    •  The committee was first to recommend that the International Financial Centre(IFC) be promoted in India’s financial capital, Mumbai.
    • The report’s emphasis was on globalization, for which it recommended sweeping financial-sector reforms. 
    • These reforms would let Mumbai position itself - at least in regulatory terms - in the same league as London or New York. Much of it was impractical. 
    • The report called for full convertibility of the rupee on the capital account. This reform was too premature, as it would have compromised Indian central bank’s control of either its exchange-rate or monetary policy. 
    • RBI to quit as government’s debt manager: The document asked for the Reserve Bank of India (RBI) to quit its role as the government’s debt manager to focus on currency stability. A 2015 attempt to do this was dropped, though inflation-targeting was made RBI’s explicit mandate. 
    • The above proposals seemed too daunting and Mumbai’s global dream fizzled out.
    • Apart from better telecom links and data enablement, not much seems to have changed in Mumbai’s favour since 2007.

Recent trends:

Recent trends suggest that global integration need not matter as much as it did earlier. 

  • Rule of law will be a deciding factor: In the current context of anxiety over Hong Kong’s financial services, perhaps a crucial enabler of quality output now is the rule of law, especially freedom of speech. 
    • Here, Mumbai could claim an edge over rival cities vying for business. 
  • Assets of Mumbai: Mumbai is well acquainted with diversity and lies in a convenient time zone between the East and West. 

Asia is already this century’s action zone and high-value information on its economic emergence would be processed best in a democratic setting added with expertise. It is a possibility that few strategic reforms at this juncture could turn Hong Kong’s loss into Mumbai’s gain.