Mumbai attacks chill India economic prospects: analysts

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MUMBAI, Nov 30 (AFP): The deadly Islamist militant strike on India's financial nerve centre clouds the future of Asia's third-largest economy at a time when it already faces a significant slowdown, analysts say.
Ruthless gunmen stormed luxury hotels, including the iconic Taj Mahal Palace, a landmark restaurant and the main train station, killing at least 195 people in a brazen attack that paralysed Mumbai for 60 hours.
The murderous rampage, which Indians are calling their own 9/11, was clearly intended to "destabilise markets and scare off tourists," said Nikhilesh Bhattacharyya, an economist at Moody's Economy.com.
The attack -- which also saw the gunmen single out Americans, Britons and Israelis -- "signifies an attack by extremists on India's economic success and its closer and warmer economic and diplomatic ties with the West," said Deepak Lalwani, India director at London's Astaire and Partners.
And the timing of the attack, the most devastating of a string this year, was "abysmal" from an Indian economic viewpoint, he said.
The stock market is down by 55 per cent this year, banks are facing a huge fund outflow due to the global financial crisis, the rupee is at record lows and growth has slowed significantly amid a widening global recession.
"There has been a continuing attempt to undermine India's economy over the past four or five years and this (attack) is part of it," said Ajai Sahni, head of the New Delhi-based Institute for Conflict Management.
The images of gunbattles between militants and commandoes "flashed around the world are not going to be helpful," said a Singapore banker on condition of anonymity.
"The effect on investor sentiment and tourism will be pronounced."
Finance Minister Palaniappan Chidambaram conceded the attacks could have a "negative" short-term impact but insisted the economy will "overcome" it.
"Investor sentiment will be affected. But within a few weeks or months it will recover," he said. India remains "an attractive investment destination."
He expects growth of at least seven per cent for this year to March after three years of at least nine per cent expansion. However, economists forecast growth as low as six per cent this year and four per cent for next year.
In the immediate aftermath, the attacks will scare away tourists and business travellers, analysts say.
"The singling out of American, British and Israelis as hostages indicates a new and worrying action by terrorists as this indicates an international agenda being fought on Indian soil," Lalwani said.
"The impact on tourism will be horrible. People will be scared, worried," said Vijay Prakash, manager of a posh Mumbai restaurant.
Foreign investors will "likely be worried about the safety of their employees and establishments," said Rajeev Malik, economist at Australia's Macquarie Research.
But in the longer-term, as long as there are no major follow-up attacks, the impact should recede, analysts said.
Global credit ratings agency Standard and Poor's said Friday it had no plans to downgrade India's rating as long as the attack was "an isolated case."
An earlier FT Syndication Service report by Joe Leahy in Mumbai and James Lamont in New Delhi and James Blitz in London adds: The terrorists staged a well-planned attack on the spirit of commerce in a city whose raison d'être is business. They devastated the two main business hotels in its financial district, one of which was an historic Indian landmark, and attacked its most popular tourist cafe.
It was a sophisticated propaganda exercise aimed at hitting India where it hurts most - its emerging status as an economic power.
But beyond their competence in executing their aims, little is known of the estimated two dozen men who attacked the metropolis of some 18m people.
The thing that is most clear is that they planned the operation to the last detail.
A senior marine commando officer, who appeared on television Saturday, flanked by other elite troops, was even more blunt, saying the terrorists knew the layout of the hotel better than his men.
He said the "very determined and remorseless" group was heavily armed and had smuggled an arsenal into the hotels ahead of their attack, including plastic explosives.
He said the commandos recovered $1,200 and Rs6,000 in cash and eight credit cards, including one belonging to a Mauritian national, from the militants in the Taj.
A naval spokesman confirmed earlier government claims that the attack on Mumbai had come from the sea. He said the militants landed in rubber boats, which were later pictured on Indian television.
Such allegations feed into Indian government suggestions that the terrorists were linked to Pakistan and other claims that the militants were spirited across the sea to Mumbai's shores on a larger vessel.