What will be the repercussions of the terrorist attack in Mumbai last November? As the dust settles, Jonathan Hart assesses the situation
Predictably, perhaps, India's claims to ongoing business stability, echoed by statements of overseas partner solidarity, were being voiced as black smoke still billowed over Mumbai in late November.
Terrorism would fail to halt inward investment, said a hastily-issued finance ministry statement. Previous attacks on its financial hub had failed to damage international business confidence in India, as would this attack.
Yet there could be no denying the underlying mood that this time was different. Not only because of the severity of the professionally organised attack against soft Western targets, together with serious future security repercussions for visiting business travellers, but also because India's formerly burgeoning economy was already on red alert as an investor risk.
Proving less immune to the worst of the global financial meltdown than initially envisaged by analysts, despite its state-dominated banking sector being viewed as better protected than most, the country's stock markets were down 60 per cent even before the rampage by militants through Mumbai, leaving more than 180 dead.
Along with a faltering domestic market and slowing exports in the months leading up to the attack, overseas investor sentiment in India had notably soured, with foreign interests unloading an estimated £10 billion in shares.
Despite this and helped by a weaker rupee, the country remains widely regarded for its high growth potential, with both corrective and fresh financial measures introduced to stimulate business, plus a forecasted GDP growth tailored down to a still-healthy six to seven per cent in the foreseeable future.
In addition, a government that had been criticised for its complacency during boom times has been galvanised into further liberalising foreign direct investment and moving ahead faster with a planned network of co-ordinated Special Economic Zones.
Together with continuing opportunities in these, plus a wide variety of sectors, UK Trade and Investment also points to £40 billion allocated for road, railway and airport improvements over the next few years.
Opportunities enough, analysts reckon, for foreign companies to keep faith with India while riding out recession at home and limiting, in economic terms, the immediate impact of the Mumbai massacre.
Yet for how long? If a chastened economy has heightened the financial risks, then the attack specifically targeted against Westerners, combined with allegedly ill-prepared security, has heightened the real or perceived physical risks of future business travel to India.
"Foreign investors probably will be warier than usual after this, although we remain positive and continue to see India as an appealing market," Jeff Chowdhry, head of emerging equities at London-based fund manager F&C, said in the aftermath of the attack.
He added that the focus on British and Americans was not enough to deter F&C from sending staff to India, at least in the near future, to maintain contact with their investments.
The threat of more attacks could further spook the market, but even if staff travel to India was eventually deemed too dangerous, Indian firms would likely travel to London to maintain contact.
"The atrocities have not changed our underlying investment view," added Allan Conway, head of global emerging market equities at Schroders, predicting increased investments to capitalise on recent market plunges.
The political fragility between India and Pakistan needed to be watched closely but only the outbreak of actual war between the two nuclear-powered neighbours would kill investment potential.
"There will be tensions between India and Pakistan and there is a risk that things could deteriorate significantly. But that is a possibility, not a probability," he said.
Risk advisory company The Anvil Group, meanwhile, urged UK corporates dealing with India to review their security programmes and conduct due diligence to ensure employee safety.
"Choosing a hotel is often more difficult than people realise," said director Matthew Judge. "Where high profile hotels often provide good personal safety compared to no-frills hotels, it is important to choose wisely."
Although hotels such as a Hilton or Marriott are at a higher risk from bombings or attacks, they still provide excellent security features as opposed to low-cost options, where the risk of kidnapping or other malicious acts is infinitely greater.
Judge added: "The location of the room itself can also help. The best room to request is one facing the back of the hotel, preferably away from the front entrance and the nearer to the ground floor, the better. The recent attacks against foreigners demonstrate the need to escape quickly and inconspicuously."
The Leela Group, which has its flagship hotel in Mumbai, issued a statement at the time of the attack.
"We have implemented strict security measures in all our properties and alerted our security to maintain a stringent level of vigilance during this 'high degree of caution' phase. As an immediate impact, we expect to see a drop in reservations in general due to cancellations by visitors for conferences and exhibitions due to this tragedy," said Onno Poortier, president, The Leela Palaces, Hotels and Resorts.
FCO advice
There is a high threat from terrorism throughout India. Future attacks may target places frequented by Western visitors and expatriates. Security levels have been increased at major airports. Travellers should, therefore, expect delays and allow more time when checking in.
British nationals should exercise particular caution when in the vicinity of key government installations and tourist sites, attending public events (including sporting events) and in public places, such as hotels, airports, shopping malls, markets and on public transport.
Travellers should take care to be extra vigilant in the lead up to and on days of national significance, such as Republic Day (January 26), Independence Day (August 15), Ramadan (21 August to 19 September 2009) and Diwali (27-28 October) as terrorists have used such occasions to mount attacks in the past. Celebration venues, prominent government buildings, public transport, places of worship and public areas are potential targets for such attacks as are high profile events attended by large numbers of foreign nationals. Travellers should expect an increased security presence.
Since July 2006 there have been terrorist attacks in major cities including Mumbai, New Delhi, Jaipur, Faizabad, Varanasi, Lucknow and Hyderabad. Some of the sites targeted are frequented by tourists and these attacks are often in clusters and at peak shopping times in the early evening.