Does India’s financial capital, Mumbai have the wherewithal to be the next Singapore or Dubai or London? Can the Indian financial sector replicate the success of the software industry or the BPO sector or the automobile industry? Can an existing Indian metropolis, bursting at the seams, be ‘expanded’ or ‘refurbished’ to make it a global financial powerhouse? DARE attempts to analyze some of these questions

The Second World War was a watershed in global history. While on the one hand it signaled the end of imperialism, on the other, many countries (most relatively smaller than India) or cities, including city-states like Singapore), that were little more than fishing villages in the pre-war era, emerged, in the post-war era, as some of the greatest financial centers of our times. While the decolonization that followed the second world war was a trigger that ushered in an era of economic rise in various parts of the world, it was by no means the only or even the predominant reason for such developments.

In the pre-war era, the financial capitals of the world were either capitals of empires or cities (mostly port towns or those on the banks of major rivers and therefore close to centers of food production), that were on the crossroads of maritime or over-land trade routes, or both. London, the largest city in the world in the 19th century, was the capital of the British empire, which ruled over a third of humanity before its imminent collapse that began with India’s independence in 1947. Yet, despite losing its status of being the predominant global political power, London’s position also owes much to its openness in attracting international businesses and, therefore, external economies of scale, such as the symbiotic advantages achieved from the concentration of a multitude of financial firms in one location. London continues to the premier financial nerve center, with as many as 481 international banks operating out of the city.

New York—which had traditionally been an important political center during the American War for Independence-came into its own during and immediately after the Great Depression of the 1930s and the second world war that followed it. Yet, New York’s rise to its present position as the world’s financial capital, was by no means sudden or unexpected. In fact, New York of the early twentieth century, was predominantly industrial, with markets in finance, clothing, publishing, entertainment, and commerce. The fact that the United Nations and several other bodies of international significance were set up in the city after the Second World War, only gave impetus to its magnetic ability to attract the best talent from all over the world.

Similarly, if one were to trace the emergence of several other regional business and financial capitals in the world, including Mumbai, it would become clear that they gained prominence over time, largely on account of favorable circumstances coupled with the ingenuity of their people, and it took them at least half a century or more to become dominant trading or financial centers in their respective regions. But must you wait that long to see your city becoming a dominant global financial center? Well, not really.

Now, consider Singapore, Hong Kong, Shanghai and Dubai. Till the end of the Second World War, most of these cities were either fishing villages or traditional trading towns with rudimentary infrastructure. Circa 2010, aberrations notwithstanding, they are at the forefront of the global financial markets. To say the least, their rise has been meteoric, something to which figures and historical evidence attest.

Singapore, which gained independence as late as 1965 (when it ejected from the Malaysian federation), is today the fifth wealthiest country in the world in terms of per capita GDP(PPP). In 2009, the Economist Intelligence Unit ranked the city-state of Singapore the tenth most expensive city in the world in which to live—the third in Asia, after Tokyo and Osaka.

Hong Kong, a relatively unpopulated territory at the head of the 1800s, has grown to become one of the premier international financial centers in the world. It also underwent a rapid and successful process of industrialization from the 1950s. Hong Kong became a regional center for financial and commercial services, the economy being linked to commercial activity, dominated by shipping, banking and merchant companies. Gradually though, the economy diversified to services and retail outlets Hong Kong was vital to the international economic links that Communist China continued in order to pursue industrialization and support grain imports. Low taxes, lax employment laws, absence of government debt, and free trade characterize the Hong Kong experience of economic development.

Shanghai, originally a fishing and textiles town, became important in the 19th century due to its port and flourished as a center of commerce and a multinational hub of finance and business by the 1930s. Shanghai’s prosperity was interrupted after the 1949 Communist revolution and the subsequent drying up of foreign investment. After 1990, the reforms ushered in an era of intense re-development and financing in Shanghai, and in 2005 Shanghai became the world’s largest cargo port. Today Shanghai is a hub for finance, banking, and a major destination for corporate headquarters, something that demands a highly educated and modernized workforce, and is the largest economic and transportation center in China.

Dubai has attracted global attention primarily through its construction projects and sports events which have made it emerge as a global business hub. Dubai’s geographical proximity to Iran made it an important port of call. Dubai was famous for its pearl exports in the first half of the 20th century, which was damaged by the First World War and then by the Great Depression. In 1971, Dubai, together with Abu Dhabi and five other emirates, formed the United Arab Emirates and later joined the other emirates to adopt a uniform currency. In the 1970s, Dubai continued to grow from revenues generated from oil and trade. In the 1990s, many foreign trading communities moved their businesses to Dubai. Large increases in oil prices after the Persian Gulf War encouraged Dubai to continue to focus on free trade and tourism and Dubai emerged as a world-class international center serving the region.

Just how did these cities gain so much traction, as business and financial centers, in such a short period of time? Are there any common strands running through their stories of unparalleled success? And, most importantly, can a regional business and financial center like Mumbai or any other Indian city become a global financial nerve center in the foreseeable future?

Before we begin to answer these questions it would be pertinent to take at least a cursory look at the economic history of India. If you have read your history lessons well, you would know that Mughal India of the 1500s was the second largest economy in the world (a close shave behind Ming China), accounting for nearly a fourth of the global GDP. By 1700 AD, subcontinent-wide political unity allowed Mughal India to emerge as the largest economy in the world, at over a fourth of the world GDP. The India of 2010, in comparison, is a far shadow of its economically prosperous past. Today, India barely produces over a percent of the global output, with an "ambitious" target of doubling it by 2020.

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