It had hoped to become Asia?s next international financial centre after glittering Shanghai. Instead, as dawn broke over Mumbai on Thursday after a night of gruesome developments, it looked more like war-ravaged Beirut.
The unprecedented scale and sheer audacity of the siege laid to key locations by the terror perpetrators in Mumbai through most of Thursday ensured that stock markets, commercial establishments as well as corporate offices in south Mumbai remained shut. This part of the city was under virtual curfew for most of the day with the precincts around the terror targets cordoned off by security forces.
At the time of going to press, casualties had touched 125, including seven foreign nationals, while 288 persons were wounded. Many of these were at the iconic Taj Mahal Hotel, which had been targeted along with the Oberoi group?s Trident. Tata Sons chairman Ratan Tata, who is also chairman of Indian Hotels, which owns the Taj, said, ?We cannot replace the lives that have been lost and we will never forget the terrifying events of last night.?
However, Tata also exemplified the resilience of the city?s residents, saying: ?We must stand together, shoulder to shoulder, as citizens of India, and rebuild what has been destroyed. We must show that we cannot be disabled or destroyed, but that such heinous acts will only make us stronger. It is important that we do not allow divisive forces to weaken us. We need to overcome these forces as one strong unified nation.?
Meanwhile, a rattled home minister Shivraj Patil and national security advisor MK Narayanan briefed the Cabinet committee on political affairs in New Delhi in the early afternoon. The terrorists were members of banned Pakistani militant outfit Lashkar-e-Toiba and, in all likelihood, originated in Pakistan, the committee was told.
Addressing the nation a couple of hours after the meeting, Prime Minister Manmohan Singh indicated the same. ?The well-planned and well-orchestrated attacks, probably with external linkages, were intended to create a sense of panic, by choosing high-profile targets and indiscriminately killing foreigners. It is evident that the group which carried out these attacks, based outside the country, had come with single-minded determination to create havoc in the commercial capital,? Singh said.
While business chambers condemned the attacks in unison, it is still unclear how severely they would impact India?s investment climate (see accompanying story). But there were already some early warning signals. One-month rupee contracts in the non-deliverable forwards (NDF) market suggested that the currency?which has already seen its value against the dollar erode 25% this year–could drop by 1.6% within a month, weaker than Wednesday?s 0.7% depreciated pricing. NDF is an unregulated offshore market in rupee forwards. Thursday also saw spreads widening on credit default swaps for ICICI Bank and State Bank of India by 15 and 20 basis points, respectively, after declining through this month.
The increased spreads indicate that the risk perception of these companies has gone up. Incidentally, the Percy Mistry panel report on making Mumbai an international financial centre submitted to the Centre last year had highlighted the need for the city to improve personal security and ensure rule of law. ?The provision of personal security and of law enforcement, will need to improve dramatically from the third-world to first-world standards,? the report said, acknowledging that ?this is likely to prove the greatest challenge of all?.
Prime target
It?s easy to gauge why Mumbai is a prime terror target. The city is the highest revenue contributor to the exchequer, paying 35% of the country?s direct taxes and 27% of the total indirect tax collections. In 2008-09, Mumbai, which accounts for the highest corporate taxes, is expected to generate Rs 1.5 lakh crore of the Rs 3.95 lakh crore target. Projected indirect tax collections from Mumbai stand at Rs 84,890 crore, against Rs 64,899 crore in 2007-08. Mumbai is also India?s FDI magnet: of the $70-odd billion in FDI the country has received since April 2000, the Mumbai region accounted for a third ($23.87 billion). ?There has always been a general perception that Maharashtra is on the hit list of terrorists… Mumbai is always their target,? said CM Vilasrao Deshmukh.