Impact of Terror

By Pavitra

Mumbai, the financial capital of India and a major tourist attraction was attacked by militants on the night of November 26^th, 2008. The city came to a halt for the next 60 hours as the soldiers battled the terrorists and rescued the hostages.

The damage was mind blowing; more than 195 people killed, more than 300 injured and a monetary loss that is yet to be evaluated. Seeing this siege through a financial glass, one can imagine the hit the world’s second fastest growing economy took due to these attacks.

Major companies like Hindustan Unilever Ltd and Merrill Lynch shut down their offices. The financial district was shut down since it was close to the targeted areas. India halted stocks, bonds, currencies and commodities trading. The attack thought to be aimed at foreigners has made a major impact on the investment climate, tourism and hospitality industry in the country. Now, Mumbai is listed as the 14^th most risky countries in Asia. India’s image as stable and a peaceful country has helped it in getting foreign investments. In 2007, Americans alone brought in $13 billion in foreign direct investments from large investors and Fortune 500 companies. Investors overseas pulled out a record $13.5 billion from Indian stocks this year and the stock market has gone down by 55%. Attacks like these will further weaken the future prospects of growth for the Indian economy. The tourism industry will be affected the most taking the safety aspect into consideration.

Analysts believe that incidents like these will scare away tourists and business travelers from coming to India.

Despite of all these events, the finance minister of India, Mr. P Chidambaram said that the economic growth will slow down to 7.5% this year before rebounding to 9% next year. He believes that there will be a temporary negative effect of this incident on tourism, investor confidence, rupee and equities. The finance minister is confident that the economy will overcome this in the long run. The small businesses will be the ones who might stop doing business but the bigger businesses will be looking at the long term prospect and are expected to stay in India. Global credit rating agency Standard & Poor’s stated that it has no plans of downgrading India’s rating as long as the attack was an “isolated case”.

http://www.bloomberg.com/apps/news?pid=20601091&sid=aXHRyUUPf7ss&refer=india

http://southasiainvestor.blogspot.com/2008/11/economic-impact-of-mumbai-attacks.html

http://news.yahoo.com/s/afp/20081130/bs_afp/indianattackseconomybusiness_081130033823

http://www.juancole.com/2008/11/mumbai-attacks-and-indian-economy.html