Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www-business-standard-com-nalsar.knimbus.com or the Business Standard newspaper
As global financial markets become ever-more interconnected, and as cross-border financial instruments grow in complexity, we are seeing a new pressure on financial centres to offer a point of difference relative to their peers. Raw market volume is declining in value as a proxy for market relevance.
As various Asian economies rise and fall, so too do their financial markets. The traditional stalwarts of Hong Kong and Singapore are being joined by the rapidly growing markets of mainland China, the Middle East, and of course, India. These markets are in some cases augmenting into specialist or ‘accelerated’ markets with unique characteristics such as single-city Free Trade Zones, specialist tech-focused equities boards, or holistic all-in-one financial centres like the International Financial Services Centre at GIFT City.
In talking to policy makers, regulators and market participants both in India and in London where I am based, India has many unique advantages in this market development arms race. There is genuine optimism on both sides about India’s growing relevance in the financial sector. The unique, long-established legacy of trade and investment between India and the UK is a particular point of difference, and the consensus is that it can potentially turbo charge the development of India’s financial markets and the broader financial services sector.
If the ongoing Financial Markets Dialogue between the Indian and UK governments is anything to go by, there seems to be a strong will to capitalise on this foundation. Financial cooperation is one of the key elements of the 2030 Roadmap adopted during the 2021 meeting of the Indian and UK Prime Ministers.
The most recent joint statement from the Financial Markets Dialogue in April saw both sides reiterate their commitment to collaboration on GIFT City—and this lies at the heart of the opportunities on offer for the Indian market. GIFT City has an offering that extends across capital markets for dual listing, sustainable finance, fund management and re-insurance.
As we enter a period of accelerated change in the financial sector—through the proliferation of digital assets, the globalization of financial markets and the important ascent of sustainable finance—there is new space for developing markets to assert themselves as innovators and regulatory first movers. India has the infrastructure in place to gain ground in these emerging areas, attracting influence and capital in the process.
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The UK has long been an exporter of financial services insofar that it often holds a key role in the formulation of global financial policy and standards. Further, London’s long-established ecosystem of financial institutions, centuries old law firms and thriving capital markets mean that the UK has had outsized influence over financial market operations and best practices.
In thinking about one of the newest and most vibrant areas of financial market development—sustainable finance—there is tremendous opportunity for Indian companies and the Indian market at large, because of the prospect for tight collaboration with other markets, including the UK. In this case, a collaboration that is already well underway.
The Financial Markets Dialogue makes clear that it envisages collaboration between the India and UK central banks on climate scenario analysis and stress testing, as well as capacity building and spreading awareness on Climate Risk and Sustainable Finance. These are critical exercises in formulating the policy responses and market norms of the future.
Opportunities to collaborate around Sovereign Green Bonds are also on the slate for exploration. And all of this will go a long way in channeling green finance to markets like India. There is also a fair amount of work under way at the GIFT IFSC to put in place an enabling framework to help turn it into India’s green finance hub.
The foundation for India’s position as a climate leader is already being laid. The India Chapter of the Climate Finance Leadership Initiative that was launched by Michael Bloomberg in partnership with the Governments of India and UK is a live example of cooperation between the two countries. While still in relative infancy, the initiative promises to make significant strides in terms of mobilizing private capital in support of India’s low-carbon transition. It’s these sort of cross-government, public-private collaborations that can attract meaningful investment where it is needed most.
As in all things, momentum matters a great deal. On the policy front, the UK-India momentum looks vibrant with the looming possibility of a Free Trade Agreement. A comprehensive FTA would further enhance the bilateral trading relationship which is already worth an estimated GBP 34 billion. The trade partnership between India and the UK is stronger than it has ever been – with more than GBP 28 billion invested in each other's economies, supporting over half a million jobs and a record number of Indian-owned companies doing business in the UK.
I’ve had the pleasure of meeting with a significant number of Indian business and government leaders in recent months—both in the UK and here in India—and the sense of opportunity is tangible. This current coalescence of economic growth, market innovation and regulatory synergy is a rare moment for both nations that can deliver significant gains for both sides, boosting FDI in both directions and fostering deeper economic ties.
(The writer is European Director at Bloomberg LP and Global Head of Government Relations and Regulatory Affairs.)
(These are the personal opinions of the writer. They do not reflect the views of www-business-standard-com-nalsar.knimbus.com or the 'Business Standard' newspaper.)