Mumbai siege is over, attacks to have near-term impact on Indian economy

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MUMBAI, November 29: Investors are keeping their fingers crossed after suspected Islamic militants last Wednesday invaded about ten places across the Mumbai city, an internet report says.
The latest assault was significant and different from the previous attacks in terms of magnitude, the nature of targets, the human loss and the impact that it can have on the Indian economy.
Analysts said the attack was aimed at scaring away foreign investors and tourists in the second largest growing economy of the world.
Meanwhile, a BBC report said: The siege at Mumbai's Taj Mahal hotel is over, officials said Saturday afternoon, three days after deadly attacks struck the city.
Police commissioner Hassan Gafoor said the hotel was now under their control. "All combat operations are over. All the terrorists have been killed."
Commandos began a new assault early Saturday aimed at ending fighting that has claimed at least 195 lives.
Commando chief JK Dutt told media three militants had been killed but his men still had to check all the hotel rooms.
Speaking to media outside the hotel, he appealed for any guests still hiding in the building to make their presence known and warned that small explosions might be heard as the clearing operation continued.
India's foreign minister has said "elements with links to Pakistan" were involved in the attacks on Mumbai.
However, his Pakistani counterpart has urged India not to bring politics into the issue, saying "we should join hands to defeat the enemy".
The Pakistani government has reversed a decision to send its intelligence chief to India to help with investigations, following criticism from opposition politicians and a lukewarm response from the army. It will send a lower-ranking representative instead. Extremely heavy and sustained gunfire was heard inside the Taj Mahal Palace hotel shortly before 0730 (0200 GMT) Saturday, as soldiers rushed into the lobby in a bid to flush out the remaining few gunmen.
Firefighters then worked to contain fierce flames and thick smoke that billowed from the building's lower floors.
All eyes will now be on India's investigation of the attacks, our correspondent says, with questions already being asked about the failure of its intelligence agencies to uncover the plans.
The commandos suspect that the militants knew the hotel well because they were very mobile during the course of the siege, he says, making it extremely difficult for security forces to secure an area in order to evacuate guests.
Some have described this as India's 9/11, and people in India now want answers as to who is responsible.
The internet report further adds: Stocks, bonds and currency markets remained shut for trading on Thursday following the attacks. On Friday, the financial markets resumed trading but were trading weak, as the underlying sentiment remained nervous due to the unfolding of events.
In the near term, it is feared that the recent attacks may raise the overall cost of doing business in the country. The incident could also raise the risk premium for the country. A section of analysts felt that the assault on Mumbai may push the incoming Obama administration sharpen its focus on the Kashmir dispute.
More than anything else, the timing of attacks doesn't augur well for the Indian economy. The economy is already in a slowdown mode. Inflation hasn't reached the target levels set by the Reserve Bank of India (RBI). Fiscal deficit of the government is not comfortable and there is some uncertainty on the nature of formation of the next government. The rupee is trading at its historic lows and companies are postponing their capital expenditure plans amid insufficient liquidity in domestic and international markets.
In this backdrop, capital flows into the country could have a greater impact than they did when similar incidents happened in Mumbai or elsewhere. Foreign investors are likely to remain cautious over the next few months. They will wait and watch to see if the incident hurts the broader economy apart from the perceived risk of investing in India.