Why Chennai can be the next global financial hub

As an established port of trade of British India since the 1600s, Chennai has always had the flair and intrinsic attributes to be a vibrant financial hub. The announcement in the Budget by Tamil Nadu finance minister PTR Palanivel Thiaga Rajan allocating 60 acres, which may not match the ambition, around the Nandambakkam Trade Centre to set up a financial city is a welcome move for various reasons including the deep understanding of Chennai’s potential for a thriving market hub. As a second most developed economy in the country as per the gross state domestic product, the Tamil Nadu government had been amnesiac not to project and develop Chennai as a major financial hub. As a major manufacturing and information technology hub in addition to being a thriving market place, the city had the organic latency to become a vibrant financial centre in the country with its strategic location and good connectivity. As a mixed economy with a large manufacturing and IT services base, Chennai always attracted substantial flow of foreign investments as seen in the presence of world’s top multinational companies operating in the city. medium86042319The presence of a large financial talent pool, vibrant export and import trade, effective international sea and air connectivity, significant knowledge capital, better geographical positioning than the fledgling Gujarat International Finance Tec (GIFT) City in terms of connecting east and west and the presence of major global banks, should propel Chennai to become one of the major financial hubs.Meanwhile, building other extensive networks, setting up the medium for free flow of capital, a sound fiscal legal system, building a firm base for a full range of financial products and a simple and low tax regime (incumbent on the Centre), are the most wanting attributes that the state needs to vigorously pursue policies to build. medium86042364However, to be counted among the global financial cities, it is imperative to be part of the bourses. The lack of one in the city, puts Chennai on the back foot.The Madras Stock Exchange, started in 1937, was the first for south India, but it whimpered to a halt in 2015 due to the absence of substantial trading and the political will and vision to sustain it. It would have been historic had we still had it competing with other exchanges in the country such as Mumbai. medium86042396Chennai’s gross regional product is pegged at a good $78 billion, and $200 billion with industrial zones in terms of purchasing power parity, with a number of thriving domestic and international businesses. Mumbai exchange these days does not inspire as much as it does not make much difference to its growth. It is regrettable that Chennai has been left behind while cities such as Bengaluru and Hyderabad have overtaken it in the past few years. Chennai has prospects for an all-round development on the lines of cities such as Sydney, which is seen moving to attract major investments while trying to project itself as a possible successor to Hong Kong. Chennai has similar characteristics to Sydney, which astoundingly contributes, as a mixed economy, one fourth of Australia’s gross domestic product ($461 billion as per purchasing power parity). Almost three decades have elapsed since the 1990s globalisation thrust, and the potential of the city has not been nurtured effectively. But new negotiations on these lines have started raising hopes that Chennai can soon be the address of a major global financial services sector. medium86042431Among global financial hubs, Hong Kong’s rise shows it did not take much time to become a major finance industry after ceding to the British in 1842 by the Nanking treaty. Hong Kong’s manufacturing base also positively impacted its rapid growth as a key global financial services market. Taking a cue from Hong Kong’s experience on how financial services hubs thrive, the primary attribute can be found in the transparent regulations related to global standards. The present finance minister with his global financial expertise could help strengthen Chennai’s position. The catharsis from the earlier trend can be slightly painful as he is set to pitch in austerity measures to tackle public debt and possible increase in local taxes to tide over the fall in the revenue due to the pandemic, in the short term, while pursuing plans to develop Chennai as a major financial hub for the future. The author is a journalist, columnist based in the UK