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Rediff News  All News  » Business » Terrorist attack not to have long-term impact: Experts

Terrorist attack not to have long-term impact: Experts

November 28, 2008 11:01 IST

The terrorist attack on Mumbai that began Wednesday night and has claimed at least 100 lives so far, is unlikely to have a long-term impact on the resilient Indian economy, experts said.

The assault on south Mumbai, which houses the symbols of the country's economic power and is the nerve centre of financial activities, could however make foreigners nervous about visiting the region in the short term and temporarily postpone some of their business decisions, they added.

The experts agreed Wednesday's attack, which is described as the second-largest terror strike since Sept 11, 2001, will increase risk profile of the country.

However, investment decisions are unlikely to be impacted, they observed.

"The ability to take this kind of shock is low given that business and consumer confidence had hit a low in the last two months because of the global financial crisis," said Saumitra Chaudhuri, member of the Prime Minister's Economic Advisory Council.

For investors, he said, the recent attack in Mumbai is unlikely to affect their economic decisions, as they would have factored in such possibilities.

Another leading economist, who did not want to be named, said the terror strikes are not good in terms of business sentiment and that the risk of doing business in India would increase. He too felt that economic decision-making would return to normalcy, with more emphasis on security and safety.

The terror attack in Mumbai, which hit multiple targets frequented by business leaders, forced the stock markets to remain closed on Thursday -- the second time in the last 20 years.

A senior commerce ministry official too felt that the attack would not impact foreign investments, which touched $14.64 billion up to August 2008 in the current fiscal -- a growth rate of 124 per cent.

"There is unlikely to be an impact on foreign investment decisions.

However, the situation would have been different if crucial economic installations like ports or refineries would have been targeted," said the same official.

Surjit S Bhalla, managing director of Oxus Research and Investments, a Delhi-based economic research firm, said that investor confidence is rooted in strong economic fundamentals. "I don't think it (referring to terror attack) would affect investor confidence at all. It may probably impact for a few days."

Though the growth rate of Indian economy is slowing in the current fiscal, it is still one among the fastest growing economy.

Sources said that a meeting of a panel of officials on the global financial crisis, headed by finance secretary Arun Ramanathan, was postponed as Prime Minister Manmohan Singh was visiting  Mumbai.

The meeting was to finalise a sops package for exporters hit by the global financial crisis. The meeting is now scheduled to be held on Friday.

BS Reporter in New Delhi