In this blogpost, Abhishek Nayak, Legal Counsel in a leading IT company, writes about, how Bombay emerged as the most important port of western India, investment policies and incentives.

“There is a pull effect of money – money attracts more money, and so it happened in Mumbai. It emerged as financial capital over time.”[1]

Introduction

Before focusing on the business benefits, which a private company can gain after incorporation, proper planning before the incorporation of the company is also very important because it has a long-term financial impact on the growth of the private company. Location of a private company office also plays an important role in shaping its future growth. Most of the private company’s preferred choice is Mumbai because of a variety of reasons. However in this article, some key factors have been described which are considered as important factors while setting-up or incorporating a company in Mumbai.

Mumbai is  located on the west coast of India and is one of the most densely populated city in India. Mumbai is well connected with other cities (both within and outside India) by various means of transport by air, water and rail. Mumbai is developed on the western coast of Arabian sea and has one of the biggest intra-city public transport networks  in India such as local trains, buses, monorails, metro, taxi, auto, etc.

How Bombay emerged as one of the most important ports of western India

Mumbai city has derived its name from the name of a goddess Mumba devi.[2] The geographical location of Mumbai port on the west coast made it economic hinge and trade window to the west. Mumbai city which we see today has been formed by joining of the seven islands, namely Colaba, Mazagaon, Mahim, Parel, Bombay Island, Worli and Old Woman’s Island.[3] After-independence, Mumbai expanded exponentially, and a number of suburban towns merged in Mumbai such as Borivali, Andheri, Malad, Thane and Bandra.

The growth story of Mumbai started in 1960; Mumbai erstwhile Bombay became the new capital of Maharashtra. Tall buildings, the Bombay Stock Exchange, broad roads and a boom in international trade changed the city’s status and brought Mumbai as the financial capital of the country.

The educational and economic progress of Mumbai began when the Britishers entered in India to do the trade. “During the mid-18th century, Mumbai emerged as an important trading town, with maritime trade contacts with Mecca and Basra. The first Indian railway train started between Mumbai and Thane in 1853.”[4] Bombay was renamed Mumbai on 6 March 1996. The port of Sopara (present-dayNala Sopara) was an important trading centre during the first century BCE, with trade contacts with Rome. Bombay emerged as one of the most important ports of western India, and later the financial centre of India.
Maharashtra took the initiative of country’s industrial development and still continues to attract the big chunk of investments, both domestic and foreign. Mumbai has established strengths in every sector including engineering, automobiles and auto components, chemicals, drugs and pharmaceuticals, textiles, information technology and biotechnology.[5] It offers world-class infrastructure, excellent educational facilities, quality trained manpower, a professional work ethic and a conducive business environment.[6]

Investment Policies and Incentives

The Government of Maharashtra has made several policy announcements in order to set up the right kind of business climate in Maharashtra, including Mumbai. These policy helps to motivate investors to invest, and their contributions help in overall development of the economy. [7]

More and more private companies prefer Mumbai for incorporation because of the favourable business environment, like:

• Robust Infrastructure
• Reliance and cost-effective telecom connectivity
• National road network
• National railway network
• 34%(approx.) of India’s international passengers and cargo handled by state airports
• India’s biggest container traffic is handled by JNPT in Maharashtra
• Favourable business environment
• State IT, SEZ policy
• Big research labs
• Platform for export and import of goods
• Largest network of industrial areas —217 industrial complexes, with 125,000 acres (50,000 hectares) of land. Specialised parks for different sectors, including IT.[8]

Maharastra Govt. has offered varieties of tax incentives to boost industrial growth in Maharashtra, especially in Mumbai and as a result of which most of the entrepreneurs find Mumbai a better place to start a business. Major nationalized banks have their head office in Mumbai, which helps private companies in seeking and getting timely funds. Most of the traders come to Mumbai to do the trade because of a bigger segment of buyers and traders are in Mumbai.

Mumbai has the two largest Indian stock markets. The Reserve Bank of India and the Securities and Exchange Board of India’s head offices are located here.[9] Since Mumbai is India’s biggest trading centre business in forex has become very easy and buyers and sellers from around the world visit Mumbai to do business.

Mumbai also has many Special Economic Zones (“SEZ”). The main Advantages of SEZ Units is the promotion of industrialization and economic growth through sustainable development. SEZ units offer tax advantages, e.g. tax rebates, fiscal incentives and lands at subsidized rates.[10]

A major feature of Mumbai is that although it is the capital of Maharashtra and Maharashtrians form the dominant part of its population, it has managed to retain its composite culture– a mixture of religions, languages and customs. Whether you are from UP or Tamil Nadu or West Bengal or Kerala, you will find your culture strongly in evidence. [11]

“Mumbai’s location is eminently suitable for day-long trading across time zones. The time difference is three and a half hours with respect to Tokyo (Tokyo is ahead because it is to the east), four and a half hours with respect to London and nine and a half hours with respect to New York (London and New York are behind us).
At 6 pm in Mumbai, it is 1.30 pm in London, and 8.30 am in New York. Most people in the financial sector in Mumbai start work after 10 am (when it is 1.30 pm in Tokyo) and are at their desk till 6 or 7 pm. So the time zone is a perfect fit.”[12]

Still Mumbai can even become more attractive if it provides more residential accommodation and faster transport to the southern end of the city. A bridge across the harbour is one of the most effective means of achieving this. The government has started taking initiates to develop Navi Mumbai, which is a neighbour satellite city near Mumbai and started working on world-class infrastructure to attract more and more  business, including the development of Navi Mumbai International Airport. The flow of money and genuine efforts of the businessmen has helped Mumbai to retain its charm, and more and more private companies find this kind of business environment conducive for their business set-up.

[1]    https://www.quora.com/Why-did-Mumbai-become-the-financial-capital-of-India-and-not-Surat-or-Porbandar

[2]            https://en.wikipedia.org/wiki/History_of_Mumbai

[3]    http://www.indiatourismadvisor.com/mumbai.html

[4]    https://en.wikipedia.org/wiki/History_of_Mumbai

[5]    http://www.archive.india.gov.in/business/investment_incentives/investment_opp_mah.php

[6]          http://www.doingbusinessinmaharashtra.org/Investment_opportunities_in_Maharashtra.aspx

[7]             ((http://www.doingbusinessinmaharashtra.org/Investment_Policies_and_Incentives.aspx)

[8]             (http://www.doingbusinessinmaharashtra.org/Business_Climate_in_Maharashtra.aspx)

[9]    http://www.rediff.com/money/column/mumbai/20070427.htm

[10]           (http://business.mapsofindia.com/sez/advantages-units-india.html)

[11]  http://www.rediff.com/money/column/mumbai/20070427.htm

[12]  http://www.rediff.com/money/column/mumbai/20070427.htm