Wednesday, February 18, 2015

Policy framework for Finance SEZs

There is a lot of interest in India today, on setting up an international financial services centre (IFSC) in an enclave, i.e. a Special Economic Zone. Possibilities include GIFT City near Ahmedabad and a MIFC in Bombay.

A concept note of ours on this subject has been released for public comment by the Ministry of Finance.

Many decades ago, free trade zones like Kandla or SEEPZ, played a role in improving India's engagement with globalisation at a time when there were many restrictions on the current account. There is a possibility that Finance SEZs could play a similar role in improving India's engagement with globalisation.

In 2007, the Percy Mistry Committee on Mumbai as an International Financial Centre (MIFC) had rejected the strategy of building an enclave, and had emphasised the importance of solving the problems of the mainland. From 2007 till 2015, the main work process of financial sector policy has been to fix the mainland. It is only in the context of that larger strategy that it makes sense, today, to additionally explore an enclave strategy. The raw materials available at hand today, owing to that larger strategy, are what make now the enclave strategy feasible. The enclave strategy is now only a small detour and is now advisable.

The Percy Mistry Committee used the acronym `IFC' for `International Financial Centre'. This has become confusing as the acronym also stands for `Indian Financial Code'. The folks at GIFT shifted to the phrase `International Financial Services Centre' (IFSC) which is unambiguous and we should all just switch.

1 comment:

  1. Is the $70 billion of rupee trade that has been mentioned in the report the total worldwide trade or is the value of trade outside India?

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