India will lose up to $50 billion to $70 billion per annum in terms of financial and commodity trade services fees in the next 12-15 years, if it fails to open up its financial sector to competition and reduce the government's control over the financial system, Percy Mistry, former chairman of the Committee on Making Mumbai an International Financial Centre, said.
"If I have to give one piece of advice to Prime Minister Manmohan Singh, I would ask him to let go of government control over the financial sector," Mistry said in an interview to Business Standard, three days after the committee submitted its report.
"This is the same advice I gave the prime minister when he opened up the manufacturing sector in 1991," Mistry, a former development economist with the World Bank, said.
"Exports of financial services from India would even surpass exports of the infotech, communications and telecom (ICT) sector by 2025 if we unshackle the system today," he added.
Mumbai, he said, has great potential to develop as the next financial centre, and companies will be able to get the same financial services here as in London or Singapore.
"Why should Ratan (Tata) and Kumar (Birla) go to London to raise funds for their acquisitions and consult yet another Indian there working with an international firm when the same services could be offered from Mumbai?" he asked.
Mistry had resigned from the committee following differences of opinion with the heads of public sector banks over criticisms of the government-owned banks and the country's slow legal system in the report.
The report was submitted to Finance Minister P Chidambaram after Mistry resigned and a significant portion of the report was deleted. Mistry did not comment on his resignation.
The key difference between the Mistry committee's recommendations and those of the committee headed by former Reserve Bank Governor M Narasimham on financial sector reforms is that the former provides deadlines for dismantling government control and estimates how much the country would lose every year by accessing financial services abroad.
The Indian economy, he says, will soon emerge as the world's third-largest economy.
"Policy-makers should accelerate reforms in the financial sector in the national interest. The roadmap with deadlines is before them. Now they must take action on it," he added.
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