India will have an international financial centre (IFC) within five years time due to sheer size of its economy, though it has to fasten its financial sector reforms process, said Tarun Jotwani, Chairman and CEO, Lehman Brothers India at the India Economic Summit, participating in a discussion on "Building a global financial centre in India."
"India will definitely have an IFC due to sheer size of its economy. But Mumbai has a long way to go. It has to put in place the physical and social infrastructure for this. We also need put reforms in the financial sector on fast track like reforms carried out in the real sectors starting from the 1991," he said.
Though the general perception is to develop a bond market first and then open up the derivative market, Jotwani said, the experience shows the reverse is true.
"European experience shows that derivative market has driven the debt market. India needs over-the-counter (OTC) derivatives as well as listed derivatives as demand for OTC derivatives are far greater. Until we have it, banks can not manage their risks properly," he added.
Jignesh Shah, Chairman and Managing Director, Financial Technologies (FTIL) said that India should have well-developed equity, bond, currency and commodity markets to make Mumbai an international financial center.
However, he cautioned that India needs to move faster in terms of regulations. For this, there has to be a strong understanding of the mode of working of a market economy.
Holding that innovation will be key for India's growth, Takashi Tsutsui, President and CEO, Jasdaq Securities Exchange of Japan, gave the example of a new stock exchange for start-ups set up in Japan named New Entrepreneur Opportunity (NEO).
"Here we are not asking for track record of the company, but future business plan more precisely and completely and we assess its progress on a quarterly basis," Tsutsui said.
The exchange has already registered one company Ubiquitous Corp., a Japanese software supplier to game maker Nintendo Co in November, while two more companies will get listed in December, he informed.
"In future, India will need such stock exchanges. Innovation will be key to sustain India's future growth. For this, the financial market should also evolve simultaneously," he said.
