|
BUSINESS
Will Mumbai carnage affect foreign investment?
Devajit
Mahanta
ON NOVEMBER 26, India’s worst-ever coordinated terrorist attacks on
Mumbai’s Taj Mahal and Trident Oberoi hotels and Nariman House, located in
Mumbai, the financial capital of India, have left the people and government
shell-shocked. The attack came at a time when India has been struggling to
minimise the impact of the global financial crisis on its economy. Will the
current aversion in Mumbai push up India’s geopolitical risk
perception and drive away foreign investors and business travelers? The
terror attack will undoubtedly have a significant short-term impact on the
economy, but whether this will spill over into the longer term depends on
how government has a plan to deal with both terror and kick-start key
economic reforms.
Though some economist pointed out that India is becoming more integrated
with the rest of the world after this high-profile Mumbai attack but
economic growth is already slowing down and is poised to hit a seven-year
low of 6% next year, after being 9.3% per annum in the last three years
between 2007-08. According to CNBC-TV 18 poll, growth of domestic product
or GDP had been estimated at 7.25% for second quarter of financial year
2009. The global financial crunch and biggest terror attack at Mumbai
prompted foreign investors to pull out more than $13 billion out of the
country. The business leaders are worried over the images flashed due to
recent Mumbai attack which could shatter foreign as well as domestic
investor confidence. Foreign tourist arrivals were 4.3 million in January
to October 2008, and foreign exchange earnings around $9.7 billion in the
same period. Government should give primacy to rooting out terrorism from
the country to make tourists feel safe in India. Indian tourism could
suffer longer-term damage in money terms and face reducesd prospects of
growth and earnings, apart from job cuts and cutting job creation if the
government does not get on with its act soon.
After the latest strikes many businessmen and tourists before travel to India
asking themselves, “If we are not safe in the Taj and Oberi in Mumbai, then
where are we safe?” This blunt question has two effects such as how
strongly government responds to the rising threat and the increased reach
of terrorism.
Admitting the terror strikes in Mumbai, Finance Minister P Chidambaram
declared on Nov 28, that “though the Mumbai strikes have affected the
foreign and domestic investment, India remains an attractive
destination and our policies enable both domestic and foreign investment.”
Fourteen years have passed since the first serial bomb blasts in Mumbai
took place under with ‘Dawood conspiracy’ but till date he has not been
caught and people suspect that some of our high-profile people are
hand-in-glove with him. Terrorism calls for increased counter-terrorism
expenditure, and drawing resources away from productive sectors for use
towards security.
The recent attack is fundamentally different than what the country has seen
so far. It targeted the city’s prime hotels Taj and Oberoi which host
affluent domestic and international travelers and are the venue for
high-power business meetings. Generally Islamic fight appeared to be
largely sectarian in intent, attacking only Indian but in the last incident
they snuffed out the lives of foreigners also which generated maximum
international impact for their cause. To gain the confidence of foreign
investors to reinvest in India
our political leaders should take the initiative in terms of collective
political will to eliminate terror attacks and facilitate coordinated
communication with world community.
To overcome India’s
worst-ever coordinated terrorist attacks in terms of Mumbai’s direct-and
indirect, short-and long-term affect we would like to see two types of
policy response. The security front in the first place must clearly be
focused on preventing recurrence and dealing with terrorists quickly and
efficiently and the economic front must be boosted with accelerated growth
and economic reform.
National security is a critical factor that determines the level of
investment both domestic and foreign. If we able to show, that we are
confident, strong and a united nations the investors sentiment can
certainly be reversed in the medium to long term.
|
<>
No comments:
Post a Comment