In thinking about India's evolution into the world of international finance, the MIFC report broke the problem into two parts. The first set of problems were those which could be done in a business process outsourcing mode. This requires good human capital, good telecom, and good urban infrastructure.
The other were the set of problems which required local and foreign financial firms, markets, and regulators. This requires sound financial and monetary policy.
Writing in DNA, N. Sundaresha Subramaniam has a story about a financial firm named Fountain Securities Analysis setting up a team of 150 people who will do day trading on international markets. The article says that this will go up to 650 traders in time. I think this is a very smart move. India's capabilities in this area are quite remarkable: for a wage like $200 to $400 a month, with a profit sharing contract on top, one can hire a very smart trader in India.
The legal architecture would work as follows. The Indian staff would use the Internet and log into some computer systems kept outside the country. Through this they would get trading screens on exchanges and execute trades on behalf of a legal person which is kept safely outside India, so as to avoid the infirmities of Indian taxation, capital controls and financial regulation. There is an increasingly large range of problems where such arrangements can be setup. Some of the most exciting finance that takes place on Indian soil could thus come about at a safe distance from the faulty mechanisms of Indian legal/regulatory/tax systems. This does not yield a full fledged international financial centre (IFC), but it does yield progress towards that direction in terms of (a) human capital development and (b) visibility in the eyes of the global financial industry.
In Chapter 5 titled Augmenting IFS provision via BPO, the MIFC report emphasises the opportunity for India in the field of algorithmic trading, since this relies more on raw intelligence and less on the human-centric flows of information that tend to take place out of physical proximity and old boys clubs. What starts off as establishing teams of traders in India can easily grow into that.