We are in the middle of a correction and slowdown in growth. This is partly the global effect and partly a local cyclical downturn. Acts such as these in times like these will definitely have an impact on our confidence in the future and the global communitys perception as India as a long term investment opportunity.
It is unlikely that this event can have a longer economic impact on a sustained basis. In the short term this could have some effect on sentiment which is anyway fragile at the moment. In the past, the market and economic effects of such events 1993 bomb blasts, 2001 parliament attacks, 2006 bomb blasts, etc have had little effect on the markets and economy. The markets and investor confidence have been resilient. However most investors have been stunned by these events and this could affect short term actions in the market though there may not be any long lasting effect.
The longer term effect of such acts is not economic but psychological and political. Subtly some economic costs will go up due to corporate spending on increased security, lower tourist traffic, a reduction in foreigners visiting India and increased government spending on security and defence. However the economic impact will be very minimal in the medium term as most of us will absorb these costs and go forward.
Still, the world will be watching our handling of this situation. Very often -as in the case of WTC attacks etc the consequence management is as important as the event itself. Any bungling, any partisan gainsaying, any narrow politicking out of this will show us as a weak nation. The initial reaction of foreigners to India will vary from sympathy to compassion to disbelief to blaming Indian intelligence network (or lack of it) to our lack of preparedness. However the longer term impression and consensual opinion about India will be built on our consequence management and how we look post this crisis. In this context Indias and Mumbais indefatigable spirit will be an important input and we should not gets demoralised and depressed about our future prospects.
One hopes that this act can in a paradoxical manner be the wake-up call for us to focus on our security. The more dastardly the act, the more it should galvanise us into action. For the last few years we have been under attack the terrorist threat to India is higher and more acute than any other nation; this should become clear after last nights attacks and it is high time that the country now puts this as priority number one. More than economic growth, more than investment growth our basic security as a nation and people is the more urgent need. I hope this helps us overcome our internal narrow issues and brings us together to fight this. This country has done this historically and we can do this time too. Yes we can!
The second hope is that we show the world that in spite of these acts, our long term prospects are intact and this should help us be more determined to usher in our tryst with our economic destiny. A few terrorists should not be able to stop us and the world should see this.
This should be an opportunity for India to emerge stronger through all this morally, emotionally and economically. Because What does not break me makes me stronger.
The writer is Chairman and Managing Director of Edelweiss Capital