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Business world: Will persistent terrorism dent India's economy

05 December, 2008

We asked.. Ajay Bimbhet, MD, Royal Sundaram Alliance Insurance; Ishan Raina, CEO, OOH India; Madan Sabnavis, chief economist, National Commodity & Derivatives Exchange ; Mahesh Chauhan, president, Rediffusion DY&R; Manoj Vohra, India director - research, Economist Intelligence Unit (EIU); Mohan Sekhar, president & COO, Collabera; Piyush Doshi, principal consultant, Booz & Co.; Sandeep Sahney, MD, India & South Asia, Genzyme India; Sharat Dhall, MD, TripAdvisor India; Vijay Kalantri, chairman, Dighi Port; V.P. Malik, former chief of army staff; Raghu Raman, CEO, Mahindra Special Services Group.

"There will be an adverse impact on domestic industry, particularly tourism and hotels."

Madan Sabnavis, chief economist, NCDEX

"If terrorism persists in a more continual form, it is going to put a dent in India''''s economy."

Mahesh Chauhan, president, Rediffusion Dy&R

"Such an attack will definitely impact the Indian tourism industry negatively in the short term."

Sharat Dall, managing director, TripAdvisor India

YES BECAUSE: For foreign investors the risks of investing in India have increased, which might compel them to consider other alternatives in the short term. There will be a negative impact on domestic industry, particularly hotels, tourism, insurance and banking. The tourism industry will be the worst hit as 70 per cent of international business travellers come to India in the first quarter of a year. With India being declared unsafe and all international governments issuing travel advisories, this tourist season will witness significant cancellations. The impact is evident in the fact that Mumbai lost thousands of crores in the terrorist attacks as many hotels, shops and various businesses had to remain closed. The economic progress of a nation depends a lot on the kind of security it offers.

NO BECAUSE: India is too attractive an emerging market for investors to ignore. They might defer their investment plans, but will not cancel them totally. Consumers are unlikely to change their consumption patterns and businesses are unlikely to alter their investment plans. However, the government needs to act decisively and revive confidence; otherwise it could make investors tentative and undermine India's economic progress in the short term. The short- and medium-term impact of this terror strike on the Indian economy will be small. In the longer term, the impact of this crisis will be depend on whether we are able to upgrade our intelligence and security infrastructure and prevent a repeat in the near future. For India, this will remain a tragedy or an opportunity wrapped in tragedy.

MAYBE BECAUSE: The impact of the Mumbai terrorist attack on the Indian industry is likely to be negligible in the long term. But there could be some slowdown in client visits during the coming months, which was anyway projected given the current global financial crisis and holiday season. Premium tourism, dependent on foreign tourist arrival stands out as one sector which might take a significant hit. Foreign tourists contribute a major chunk to tourism revenues for India, almost half of which is concentrated in the coming winter season. People are hoping that this incident will see Indians and our leadership stand together, and work towards drawing up a cohesive strategy to counter the threat of mindless terrorism.