Terrorism is not new to India; just two years ago, over 200 people died when bombs ripped through seven packed commuter trains in Mumbai and over the past ten years, over 1,250 people have lost their lives to terrorist attacks. Yet for most people, this latest attack in Mumbai represents a different kind, not degree, of tragedy; indeed, many are terming it “India’s 9-11”. The comparison is apt in many ways.
This is the first time that impact has been felt across all society: never before have India’s elites, or its expatriates, had to count their dead. Mumbai’s rich and famous, who generally lived their lives heedless of Government, were reminded of their dependence by its failure. These were no “ordinary” blasts with nameless victims reported after the fact; these were terrorists at large, roaming the streets randomly killing, holing up with enough ammunition to stave off commandos for three days… relayed live in graphic detail by 24-hour news. The end result: a cocktail of emotion:. shock, anger, frustration, depression – the reality is that Mumbai is grieving.
Travel and tourism has been obviously hit. Queues now proliferate at airports and luxury hotels. Cars must pass a gauntlet of security checks; only guests with prior reservations are allowed in and are ushered through a string of security measures: metal detectors, frisking by guards, luggage thoroughly searched. Despite the lifting of the Foreign Office warning on unnecessary travel to India, certain (mostly American) companies are questioning their commitment to send staff there. Experts estimate the attacks could hurt hotel bookings and airline-ticket sales for a year; rising insurance premiums against terrorism will likely drive up recurring costs.
Consumer demand has also been affected. Footfalls across retail malls in the city have dropped by 50%; sales are even lower, with Mumbaiites staying away from shops, movie halls and restaurants. Equally devastated was the stock market itself, which was suspended for a day, resulting in many millions of lost trades.
The longer-term effect of the attacks will be to prolong trends in the wider economy. Just as the NASDAQ crash preceded 9-11 by fifteen months and was deepened by it in turn, the Mumbai attacks have occurred at a time of general slowdown. Indian stocks were already 60% off last January’s high, part of a global sell-off of emerging markets as investors dumped perceived risk; the tourist season was already slow, as Westerners had reined in spending fearing a global recession. Indeed, analysts expect India's economic growth rate to slow to a seven-year low of 6%, regardless of the attacks. Nonetheless, the attacks will certainly sour sentiment related to future investments at a time when it was already poor.
Despite the attacks and gloomy market sentiment, India's economic fundamentals are strong; fear however still lingers. How long that stays depends solely on how fast the Government acts to restore confidence – by strengthening law and order as well as infrastructure. The verdict will be known soon enough: general elections are only five months away.