Rejecting short cuts like creating small pockets with latest amenities, an official committee has recommended that to make Mumbai a truly global financial hub by 2020, the infrastructure of the entire city should be improved.

Disagreeing with the view that Special Economic Zones with world-class facilities could be set up for the financial services industry in view of the inadequate infrastructure in Mumbai, the panel said that such a solution was not viable.

"If Mumbai is to host an international financial centre, then its infrastructure deficiencies need to be resolved quickly. It cannot be done through arabesques such as the Navi Mumbai SEZ. Locating it in an SEZ is not a viable option," the committee said in its report submitted on Monday.

It noted that the infrastructure of the city, which will require huge investment, should be developed through private-public partnership without much tax breaks.

The committee said through world-class infrastructure, as the one available in Tokyo or Frankfurt, Mumbai must attract affluent, mobile and multi-culturally inclined globally competitive persons to work for Indian or foreign firms in the financial sector.

Apparently, rejecting the 'son-of the soil' approach of the Shiv Sena and other political parties in the state, the panel said that the city will need to be seen as a "cosmopolitan metropolis that welcomes and embraces migrants from everywhere -- from India and abroad."

"Perhaps, 25-30 per cent of them will be of Indian origin. The remainder will be expatriates from around the world representing every country that has significant trade and investment links with India (and Asia). . . from over hundred different countries," it said.

Referring to the slow progress in infrastructure building, the committee recommended inviting open participation of foreign construction and development firms alongside their Indian counterparts to ensure that Mumbai's infrastructure deficit was covered in the next 10 years.

It would include world-class health and educational services, hotels, cultural institutions apart from 24-hour power and water supply.

Concerned with the 'non-performing' Mumbai municipal corporation, the panel -- which also included ICICI Bank chairman and managing director K V Kamath; State Bank of India chairman and managing director O P Bhatt -- wanted that the city administration should be handed over to a 'City Management' elected or appointed with its own revenue base and and financial independence.

"Mumbai has been a milch cow for both the Centre and the State for some time. It has got very little back for its own urban development," the panel said, adding that the asymmetry needs to be reversed.

It also warned that if the government failed to take action, the benefits would be earned by the other financial centres in the world such as Singapore or London, as Indian financial firms that will graduate into multinationals will relocate their operations to other countries.

The high-powered committee asked the government to make rupee fully convertible vis-�-vis other currencies by December 2008 and reduce its equity and finally exit all financial institutions by 2015 to make Mumbai an international financial centre.

The committee in its report also suggested replacing existing legislations governing financial sector with a new Financial Services Modernisation Act and abolishing controversial Securities Transaction Tax and stamp duties.

The committee has recommended that global firms dealing with corporate law, accounting, business consultancy and tax advisory should be allowed to set up offices in Mumbai.

"Having considered the recommendations of the Tarapore Committee-II report very carefully, the committee nevertheless recommends that full capital convertibility should be achieved within a time-bound period of the next 18-24 months and by no later than the end of calendar 2008," it said.

The convertibility question is critically linked to the possibility of a currency crisis, which India has successfully avoided over 1991-2007, said the report, submitted to Finance Minister P Chidambaram.

To make Mumbai an International Financial Centre in two phases by 2020, the committee said India should emulate those countries that have successfully implemented full currency convertibility and avoid mistakes made by few others.

Full convertibility of the rupee would involve removal of restrictions on currency transactions. The Tarapore Committee-II, appointed by the Reserve Bank of India earlier, called for fuller rupee convertibility over three phases to be spread over five years by 2010-2011.

The expert committee on Mumbai said its recommendation on currency convertibility needs to be dovetailed with an 18-24 month timetable along with its other recommendations.

"That would kill two birds with one stone," it said. "Other recommendations" include cutting government stake in all types of financial firms to below 49 per cent by end-2008, below 26 per cent by end-2010, and toward a full exit by 2015."

"If this trajectory of withdrawal is not put in place, the prospects for and IFC in Mumbai emerging as a credible and competitive centre in the eyes of the global financial market will be compromised," the report said.

However, a few members disagreed with the suggestion, which has been retained in the report as the majority view.

The committee further suggested a Financial Services Modernisation Act to place all regulatory and supervisory functions connected with all organised financial trading like currencies, bonds, equities, corporate bonds and commodity derivatives into the Securities and Exchange Board of India.

This requires collecting together elements of law that are presently dispersed across many other acts, including the RBI Act, the Foreign Currency (Regulations) Act and the Companies Act.

In fact, the new law should also incorporate a redrafting of the Banking Regulation Act, shifting towards principles-based regulation and giving banks greater flexibility in operations and management than is presently the case.

There is considerable merit in merging the new securities law and the new banking law into a new Financial Services Modernisation Act, even if two regulatory agencies continue to be distinct.

The report also recommended doing away with all transaction taxes like securities transaction tax and stamp duties.

The committee agreed with Tarapore Committee-II's views that the discriminatory ten per cent ceiling on investments by corporates in banks is unjustifiable and should be removed immediately.

It also recommended identification and removal of all impediments to outsourcing of asset management by financial firms in India --banks, insurance companies, mutual funds, pension funds, FIIs and hedge funds.

To take on competition from foreign banks from 2009, the committee suggested that domestic banks should be given freedom from RBI to open branches or ATMs. This policy should be extended to all banks to give local banks a one-year head start over foreign rivals on opening branches.

Is better infrastructure the answer to Mumbai's woes? Do you think Mumbai can be a global financial hub if its infrastructure improves? What can be done to make Mumbai a city comparable to the world's best cities? Tell us what you think!