26/ 11 : its

economic

perspective

Is India really

affected by it?

Aftab Dewani 39

Ankur Kalani 42

Azim Samnani 44

Sanif Momin 43

Siddharth Gandhi 40

Acknowledgement

e would like to express our profound gratitude to

our project guide Prof .Manasi, who has so ably

guided our research project with his vast fund of

knowledge, advice and constant encouragement,

which made us, think past the difficulties and lead us to

successful completion of the project.

We have tried to cover all the aspects of the project

& every care has been taken to make the project faultless. We

have tried to write the project in our words as far as possible

and simplified all the concepts by presenting it in a different

form.

We’ll be looking forward in future for such type of

project. We are eagerly waiting for fruitful comments &

constructive suggestions.

Thank you

W

Mumbai attack and its aftermath ................................................................... 5

26/11 a deliberate plan to hit Indian economy ............................................. 10

The Impact of 26/11 on the Indian Economy ............................................... 13

26/11 and after effects on tourism in India ................................................... 17

Mumbai Terror Attacks ............................................................................ 18

Tourism Industry ...................................................................................... 18

Terror Tourism! ........................................................................................ 19

Terrorist Attacks Will Further Weaken a Slowing Indian Economy ......... 21

Political Fallout ......................................................................................... 22

Global Implications ................................................................................. 24

Gloom and Doom ..................................................................................... 25

Impact on Industries ................................................................................30

TERRORISM IS HOLDING BACK INDIAN ECONOMY ............................ 34

A] SHORT-TERM IMPACT ...................................................................... 35

1) Loss of Human Capital .................................................................... 35

2) Investor Behavior............................................................................. 35

3) Short Term Financial Loss .............................................................. 35

4) Retrenchment effect on Specific Industries ..................................36

B) LONG-TERM IMPACT ........................................................................36

1) Political Instability ...........................................................................36

2) Global Implications ......................................................................... 37

3) Long Term Financial Loss ............................................................... 37

Post 26/11, India turns to Russia for small weapons ....................................38

Post-26/11, US more committed for biz with India .................................... 42

Security market soars after Mumbai attacks .............................................. 44

Stepping up security ................................................................................ 45

Investors worry about another attack after Mumbai ................................. 49

STOCKS RESILIENT? ............................................................................... 51

India faces growing Chinese hostility after 26/11 ......................................... 53

US-China relationship ............................................................................. 54

Mumbai attacks costs insurers Rs 500 crore: IRDA .................................... 57

Terror cover premium hiked by 30% .......................................................... 58

Conclusion ..................................................................................................... 61

Bibliography .................................................................................................. 62

Mumbai attack and its aftermath

he recent terrorist

attack on Mumbai is

being called India's 9/11.

In sheer audacity of

design, that is true. The US,

whose mainland has never

been attacked, could not have

imagined that a set of planes

could be transformed into

enormous bombs. Nobody in

India thought of a sea-borne

invasion of Mumbai- the

attackers are said to have

hijacked a fishing trawler,

steered it towards the Mumbai

coast and then landed on

motorised dinghies. Not just

out-of-the box thinking but

meticulous execution has been

in evident in both the cases.

In 9/11, the attackers targeted the World Trade Center, beloved symbol of

T

The Taj burning as a result of a series of blasts inside the building

9/11 changed America.

America's financial capital. In the

Mumbai attack, the targets were

two high-profile hotels and a Jewish

centre in India's financial capital.

The objective was the same: to

cause dislocation and mayhem in

leading financial centers in ways

that would capture the world's

attention. Smoke billowing out of

the WTC is one image that is

etched in our minds; so will that of

the Taj Hotel in flames. The

Mumbai attackers have certainly

met their objective.

9/11 changed America.

Unilateralism and the doctrine of

pre-emption became central to

American foreign policy. There was

the bombing of Afghanistan and invasion of Iraq thereafter. Also less noticed

transgressions of international law such as a missile attack on Sudan, the bombing

of a suspected nuclear site in Syria and missile and bomb attacks on terrorist

hideouts in Pakistan.

The US has made clear that it will not be bound by the UN or

international law when it comes to the protection of its interests. The US has also

gone after terrorists in several countries and spirited them to other locations for

interrogation and incarceration. It did this in Italy a few years ago- an Imam was

seized by CIA operatives. An Italian judge has issued arrest warrants for the CIA

operatives, a warrant that has no chance of being enforced.

Within the US, the full financial might and technological capability of

the country has been brought to bear on preventing infiltration of terrorists. The

issue of visas has become more stringent, there is far greater scrutiny of visitors

(including strip searches) at airports, stepped up surveillance at home and abroad

and an abridgement of civil liberties under the Patriot Act. These have ensured

that no terrorist attack has occurred in the US after 9/11.

There have been comparable measures in the UK after its own 7/11.

Surveillance through closed circuit TV is so pervasive that the Orwellian

prediction of 1984 seems to have come true in the UK. On top of this, tapping of

phone calls and monitoring of email has been stepped up- the American journalist

Seymour Hersh has said that he would never use pay phone in the UK because

there was little chance of the call being confidential.

One other country that has had success in the war of terror- in the

sense of limiting attacks on its soil- is Israel. But Israel is unique. Not only can it

pour huge financial and technological resources towards securing itself, it is

willing to use the most draconian methods. A whole wall has been created

between Israel and the occupied territories and entry through it into Israel tightly

regulated. Palestinians have been beaten into quiescence in the most brutal ways.

Above all; there is the intense determination of the Israeli people, military

conscription for all young people and the fact that Israel is a small country.

Where does India stand after the Mumbai attack? One, there is no

question that security measures in key places, including hotels, will be at a higher

level hereafter, causing no small inconvenience but that is something that people

will come to accept.

Two, it's hard to see how the pressure to enact tougher terror laws can

be resisted- even PM Manmohan Singh had to mention this in his address to the

nation after the attack. This does mean a certain curtailment of civil liberties.

Three, there will be profiling of communities and a crackdown on

suspects within these. These will create more alienation and hence a greater

susceptibility to domestic terrorism.

Will terrorism decline in India in response to strong-arm measures as

happened in the US and Israel? One must be sceptical. We do not have

comparable funds or technology but that is not the only problem. We must reckon

with the country's size and diversity. Above all, there is the problem of corruption

and poor governance.

Key institutions of the state, notably the police and the judiciary,

suffer from both corruption and poor governance. Strong anti-terror laws, in such

a situation, will simply become weapons for persecution and extortion.

Vulnerability to terrorism, it is worth pointing out, is an aspect of

corruption and an indifference to the rule of law. The political class will not

prosecute or pursue high-profile cases of terrorism; businessmen will maintain

links with the underworld; the police is more concerned with collecting bribes

than with maintaining law and order; the media has no qualms about lionising

celebrities who have been convicted in important cases. When a political party

moots the idea of giving a Lok Sabha seat to the key suspect in the Malegaon case,

which is confirmation that India in many ways has the traits of a banana republic.

Without an overhaul of governance, without greater accountability, it

is hard to see how terrorism can be fought effectively. It is the democratic process

and the rule of law that need to be strengthened for these to happen.

Unfortunately, the knee-jerk reaction to heightened terrorism is in

the opposite direction- the abridgement of liberties, greater powers to the police,

contempt for politicians and the political process. On TV, I saw a bunch of ad-men

pouring scorn on politicians and asking them to keep their hands off the law-

enforcement machinery. That is a prescription for fascism.

The gloomy conclusion that emerges is that India will try to emulate

the tough methods adopted by countries such as the US and Israel without having

the commensurate governance or enforcement capability. This can only lead on to

a downward spiral where terrorism is concerned.

26/11 a deliberate plan to hit Indian economy

Hours before Islamabad publicly admitted to terror emanating from

its soil, President Pratibha Patil said here on Thursday that India expected

Pakistan to take “decisive and credible action” against all terror groups operating

from its territory.

In her customary address to a joint sitting of Parliament, Patil called

the attack in Mumbai as a deliberate plan to retard India's economic progress and

pointed that terrorists from Pakistan have continued to attack India despite

Remembering the Martyrs

solemn commitments made by Islamabad that it will not allow its territory to be

used against India in any manner.

In her more than hour-long address, the President also touched upon

the global economic downturn but expressed confidence that the Indian economy

would grow at a relatively high pace of 7.1% in the current financial year.

Recounting the record of the government in the last nearly five years,

Patil said looking back, we see hope. We have not

only withstood the challenges but also emerged stronger.

Cautioning that the nation faced multiple internal security challenges,

the President said the country witnessed terrorist attacks in several cities with

growing levels of sophistication and assistance from outside the country. “Several

innocent lives have been lost. The terrorist attacks in Mumbai as well as the

terrorist incidents in Delhi, Ahmedabad, Hyderabad, Jaipur, Bengaluru and Assam

and before that on our embassy in Kabul were an assault on all the values that our

country stands for,” she said.

Asserting that one of the landmarks achieved by the government was

the signing of Indo-US nuclear deal, she said that India now looked forward to

working with the new Obama administration to the mutual benefit. Touching on

economy, the President said government’s policies have ensured that even as India

faces an economic slowdown along with rest of the world, its fundamentals are

much better.

The President said India’s domestic demand could inject fresh

momentum to the economy while the Indian banks were well capitalised and faced

no threat that many of their counterparts faced in other parts of the world.

Referring to the economic stimulus measures taken by the government, Patil

expressed confidence that they will drive the demand for goods and services,

reviving production activities in the manufacturing as well as services sectors.

Even in the prevailing adverse global economic environment, she

hoped the Indian economy would still register a relatively high growth rate. The

President said the sharp increase in global commodity prices, especially those of

petroleum and food, have an adverse impact on the economy....

The Impact of 26/11 on the Indian Economy

Before analyzing the impact of the Mumbai terror attacks on India’s

economy, we must understand how 26/11 was different from any other terror

attack on the country.

1. There is no denying that the attacks were the most audacious of its kind ever

in India. But this assessment of the tragedy is based more on the way it was

executed, than on the actual number of victims it claimed.

God Helps Those Who Help Themselves

2. If you jog your memory back to the serial bomb blasts in Mumbai, 1993, where

about 250 people were killed, you will realize that the city has witnessed

tragedies of this magnitude before.

3. However, the attacks were unique, in a rather dubious way, as it was perhaps

the first instance where a small group of highly motivated terrorists held an

entire nation and its defence forces to ransom for over three days.

4. Coming at a time when the world was experiencing economic turbulence, it

triggered fears that the Indian economy would be adversely affected.

The last point is of particular significance in these difficult times. Should an

atrocity like 26/11 essentially have a negative impact on the economy? As it turns

out, this is not the case.

The impact could have been termed negative, had the following cases been true:

1. First Case: There was heavy foreign investment in India in the months before

the attacks.

2. Second Case: Foreign investment showed a dramatic decline following the

tragedy.

Let us examine the first case:

1. The first case is certainly not true. In the wake of the global economic crisis,

foreign institutional investors (FIIs) were tripping over each other in their hurry

to pull money out from the Indian markets in the months before the terrorist

attacks.

2. In the process, they pulled the rug from under the feet of the sensex, sending it

crashing nearly 12,000 points in eleven months.

Let us now examine the second case:

1. Even as the attacks were unfolding in Mumbai, the markets were witnessing

something totally unexpected. Instead of a massive outflow of funds from the

Indian markets, money was actually flowing in. So, the second case is also not

true.

As you can see, the impact was actually favourable. But how did this

miracle happen? As S.A.Aiyar points out in his column in the Times of India, the

answer is fairly simple. The FIIs saw a big opportunity to buy shares and invest in

equities when the market was low. When the markets reopened a couple of days

later, the sensex actually registered a gain. It has kept up this trend ever since.

The events worked in India’s favour in other ways too. US

intervention has forced Pakistan to crack down on terror outfits operating out of

its territory. With the possibility of a confrontation between India and Pakistan

waning, this can only have a positive effect on the Indian economy.

Anyone who hoped to shake the foundations of the Indian economy

with this act of terror must be feeling very foolish indeed.

However, it would be wrong to say that the attacks had no impact

whatsoever on the Indian economy.

1. It affected tourism and hotels, with many tourists cancelling bookings.

2. The global economic crisis had already hit tourism and 26/11 only made

things worse.

But tourism contributes a very small part of the GDP. It is not

something that will seriously impair the progress of the economy.

26/11 and after effects on tourism in India

It was exactly a year ago the gateway of India - Mumbai was under the

siege of terrorists. 26/11 in 2008 is a day of horror in the minds of Mumbaites. The

World saw the terrorists’ activities and the commando operations live on many

channels. The burning picture of Taj Hotel symbolizes the terror unleashed in the

Mumbai coast. The 60 hr long battle saw the terrorists galloping at-last and

equally with great sacrifices of Indian warriors. More than 160 people lost their

lives and few hundreds were injured.

Incredible !ndia no matter what

Mumbai Terror Attacks

On this day, the great Indian symbols were attacked. Gateway of

India, Taj Mahal Palace, Oberoi Hotel and Nariman House were some of the

important monuments attacked by the terror networks. It was not the first time

these patriotic monuments were aimed by miscreants. The terrorist bomb attack

on August 25, 2003 near the Gateway of India killed nearly 50 people and left

hundreds injured.

Tourism Industry

The monuments were damaged, the lives of many were shattered and

many establishments were under threat. 26/11 affected the life of common man all

over the country, especially in major urban cities like Delhi, Bangalore, Kolkata

and Chennai apart from Mumbai. All ways of life were affected. Travel and tourism

was also not an exception. It was a major casualty.

26/11 in 2008 had happened just at the beginning of the India’s best

tourist season in the decade. It was expected to cross the great landmark of 5

million foreign travellers in the year. 26/11 became the bottleneck for the

miraculous growing of tourism industry in India. In fact the tourism sector was not

sound enough to absorb such an impact as it was already affected by the economic

meltdown. Inflow of foreign travellers was reduced and local tourists avoided big

cities. Mumbai especially saw the significant reduction in the number of tourists in

the first three months after 26/11. The major casualty is the tourism ministry’s

projection of 10 million tourists by 2010. It is perceived that the target would be

difficult to achieve!

However, the concentrated efforts of industry and the Government

are now bringing fruits. They could mobilize voices of many world-wide agencies

like National Geographic to endorse and assure safe tourism in India for the

travelling community and promoted India as a must see destination. Thanks to the

confidence building measures and the great support by the Government

machinery, Indian tourism regained its lost glory by mid of 2009.

Terror Tourism!

At the other end, Mumbai has seen the arrival of a new set of tourists.

Travellers flock to this place to view the monuments like Taj hotel, Gateway of

India, Cama hospital and Nariman house, which were under terror attacks. Local

tourists and foreign travellers’ inflows to Mumbai have been on increase on

account of this new found ‘terror tourism’. Bullet marks on walls, windows and

roofs, damaged regions and reinstated structures are all very inviting for the

tourists visiting here. Tourist guides and agencies give elaborate descriptions on

the events and showing various places under the siege. You can get details of the

past terror and bomb attacks at this place from these guides.

The surge of travel and tourism industry in the country in 2009 is a

pointer towards the great confidence the travelling populaces and vacation tourists

in safe Indian Destinations. Statistics points to the fact that there was a dwindling

of about 8% in the number of foreign tourists to India in 2009 comparing with the

corresponding numbers in 2008. This 8% is pretty small considering the real facts

about the economic recession and the fear spread due to the H1N1 flu. It just tells

that the terror attacks or security threats has not much affected the tourism

industry in India.

It is predicted that Mumbai is going to witness a surge in tourists as

the economy regains and the business travels increase. You can go anywhere in

India. You can be assured of extra secure tourist activities in the picturesque,

inviting and breathtaking Indian hot spots.

http://www.youtube.com/watch?v=z-Sk75MScBM

http://www.youtube.com/watch?v=KPpLeXa5-6s

Terrorist Attacks Will Further Weaken a Slowing Indian

Economy

The Belvedere is an exclusive

club at Mumbai's Oberoi hotel. Along

with its equivalent at the Taj Mahal -- The

Chambers -- it is a popular watering hole

for India's business barons and CEOs.

According to an estimate by business

magazine Business Today, the members of

the Belvedere alone account for more

than 80% of the market capitalization of

India's publicly listed companies. In late

November, both clubs were savagely

mauled in the terror attacks that rocked

the city and shocked people around the

world. During a 60-hour siege at the two

hotels and other locations, terrorists took

hostages and ran riot with grenades,

assault rifles and bags of RDX, a powerful

explosive. Ashok Kapur, chairman of Yes Bank, was among the 170 people killed in

the attacks. The terrorists did so much damage that the two hotels could be closed

for six months to a year.

Small Things Happen In Such Big Cities

The Oberoi and the Taj are not just places to strike deals. Events held

here routinely host the rich and famous. The presentation ceremony of The

Economic Times Awards for Corporate Excellence was to be held at the Trident --

the companion hotel to the Oberoi which was also attacked by the terrorists -- on

November 29. Prime Minister Manmohan Singh was to preside over the event.

Practically every CEO of India's leading companies would have been there. Perhaps

presciently, The Economic Times reported on November 11: "Given the high profile

nature of the event, the security agencies have already begun scouting the location

for D-Day." The three-day terror attack, which is now known as 26/11, put an end

to the celebrations.

The ripples have not been felt in India alone. "There will hardly be a

Fortune 500 chief executive who has not lately stayed in the Oberoi or the Taj

Mahal, and the impact of this attack will be felt in boardrooms around the world,"

wrote The Economic Times.

Political Fallout

On the political front, the siege of South Mumbai has already taken

its toll. Union home minister Shivraj Patil -- responsible for the nation's security --

has resigned. Former finance minister P. Chidambaram has taken over that job.

Prime Minister Singh has taken charge of the finance portfolio. But the finance

ministry, in today's global crisis and domestic slowdown, is a fulltime job. Some

observers believe that Singh may not be able to do justice to it, given his other

responsibilities.

In the state of Maharashtra, too, of which Mumbai is the capital,

heads have rolled. Chief minister Vilasrao Deshmukh has been forced to resign.

The last straw was his going to visit the ruined Taj with a filmmaker who

specializes in disaster movies in tow. The press dubbed it "terror tourism" and the

Congress leadership in Delhi sacked Deshmukh. The state deputy chief minister

and home minister R.R. Patil, who belongs to Nationalist Congress Party, a partner

of the Congress party, told a press conference that "small incidents like this [the

Mumbai terror attacks] do happen in big cities". He, too, had to step down after a

public outcry.

What will happen in the medium term is debatable. General elections

are due by the middle of next year, and it is possible that the opposition Bharatiya

Janata Party (BJP) may cash in on the widespread public anger. "This has

undoubtedly given a shot in the arm to the BJP," says Rajesh Chakrabarti, a

professor of finance at the Hyderabad-based Indian School of Business (ISB). "It is

an anti-incumbent advantage. Any opposition party would have benefited, but the

BJP benefits because it has been trying to project itself as being tough and has

been blaming the government for being soft on terrorists. How well it will be able

to hold on to this until election time and translate it into votes and seats remains

to be seen."

Global Implications

Political implications are also apparent at the international level. One

of the terrorists' targets was Nariman House, a Jewish centre, and as a

consequence, India and Israel are moving closer. India has also moved closer to the

U.S., which sent Secretary of State Condoleezza Rice to visit the subcontinent.

After visiting both India and Pakistan in an effort to avert armed confrontation --

which many in India called for, especially since the media labelled the terrorist

attacks as "India's 9/11" -- Rice urged Pakistan to cooperate with India in nabbing

the terrorists. (The terrorists are alleged to have been recruited in Pakistan.)

"At such times of crisis, the positive aspect is that not only do we see

all the political forces internally standing up as a single force to face the situation,

but internationally as well there is solidarity in the fight against terrorism," says

Bundeep Singh Rangar, chairman of the Delhi-based IndusView, a research and

advisory firm. Chakrabarti of ISB adds: "I don't see serious international fallout.

There will be some diplomatic efforts at trying to pinpoint Pakistan and some

pressure will build up on Pakistan. There has been talk in Washington about

reacting to the Mumbai event as a multi-country initiative rather than treating it

as just an India-Pakistan affair. But the problem, ironically, is that Pakistan now

has an elected government and they can't come out looking like they are giving in

to India's demands even if they believe that India's demands are right. For decades,

public opinion in Pakistan towards India has been negative. The perception of

public approval of terrorist activities targeted at India must change before

politicians can change. The Mumbai incident by itself will have only a temporary

impact. But if the talk of a military solution between India and Pakistan aggravates

then that can have a worse effect on capital flows than the terror attack."

When it comes to economic issues, Mumbai -- the country's financial capital -- is

likely to feel the impact of the terrorist attacks, much as New York City did after

September 11, 2001. "Mumbai brings in 40% of foreign trade, 60% of customs duty

collections, 40% of income tax collections, 20% of central excise collections and

$10 billion in corporate taxes," says Rangar of IndusView. Chakrabarti notes: "The

Mumbai terror attack has been the most dramatic in a long series of terror events

in India. It involved foreign hostages and places where business leaders, executives

and foreigners frequented. It has therefore been a much more potent media drama

than any of the previous terror events. This grabbed worldwide attention and there

is certainly a negative impact on India's risk and security perception. It will dent

foreign investors' views of India. This will lead to a drop in investments, but I

expect it to be marginal."

Gloom and Doom

The attacks came at a time when India's economy had already begun

to slow as a result of the global recession. The widespread fear and anxiety have

added to the gloom. According to recent data, in the second quarter (July-

September) of the current financial year, GDP growth has fallen to 7.6% compared

to 7.9% in the previous quarter. The growth rate in the first half of the year was

7.8%, compared to 9.3% for the corresponding period of the previous year.

The mood of business has turned highly bearish. Citibank estimates

that GDP growth will be 6.8% in 2008-09 and 5.5% in the next fiscal year. Goldman

Sachs and Merrill Lynch expect 2009-10 growth to be 5.8%, Nomura believes it will

be 5.3% and First Global puts it at a bottom-of-the-barrel 3.5%.

A tribute

Exports are down. In October, they fell 12.1%. The $200 billion target

for 2008-09 will most likely be missed. Manufacturers are pessimistic. The ABN

AMRO Purchasing Managers' Index, an early indicator of the mood of

manufacturing, is at its lowest since it was set up in April 2005. To take one

specific sector, the Society for Indian Automobile Manufacturers estimates that

vehicle sales could slide 25.5% in the last three months of the calendar year and

more than 34% in January-March 2009. Real estate is also in the dumps. The

Bombay Stock Exchange (BSE) Sensex has meanwhile been hovering around 9,000,

a far cry from the 21,000 it had crossed in January.

These clouds do have a silver lining: Inflation, which was almost at

13% in August, fell to a seven-month low of 8.40% for the week ended November

22. This gives the Reserve Bank of India (RBI) the leeway to focus on boosting

growth rather than fighting inflation. Indeed, on December 6, RBI governor D.

Subbarao announced a 1% cut in the lending rate, effective December 8. The repo

rate, the rate at which the RBI lends money to banks, now stands at 6.5%.

Subbarao told a news conference later that growth would moderate "more than

anticipated". On the flip side, inflation, too, would decline to below the estimated

7%. The government has meanwhile cut the administered price of petrol and other

petro-products. The central government has also been announcing components of

a stimulus package to boost the economy.

Still, many believe the terrorist attacks will hurt the economy at a

time when it is weakening. The Indian Council for Research on International

Economic Relations (ICRIER) has an estimate of the contribution of "external

shocks" such as the financial crisis and the terror attacks. The New Delhi-based

think-tank recently completed a study on the effect of external shocks on the

country's GDP growth rate. According to Rajiv Kumar, director & chief executive of

ICRIER, "ICRIER has been forecasting India's GDP growth rate with the use of

leading indicators. These are variables that are considered to have significant

influence on the future level of economic activity in the country." The 10 indicators

that ICRIER uses include production of machinery and equipment; sales of heavy

commercial vehicles; non-food credit; railway freight traffic; cement sales; sales of

the corporate sector; fuel and metal prices; real rate of interest; the Sensex; and the

GDP growth rates of the U.S. and Europe.

We will never forget

"Leading indicators can predict future growth based on what has

already happened in the past but cannot capture the impact of sudden external

shocks which may have an immediate impact on the economy," says Kumar.

"Examples of such shocks in the past are the IT boom going bust [after Y2K], the

crop failure in 2002-03 and the recent U.S. financial meltdown. The leading

economic indicator index, with a five-quarter lag, and the shock represented by a

dummy variable (equal to 1 with shock and 0 without) have been used to forecast

India's future GDP growth."

Impact on Industries

That's the macro picture. A

sectoral analysis sheds more light on the

possible damage to different industries.

"Terrorism's economic impact has

normally been short lived," says a report

titled, Economic Impact of Terrorism, by

securities firm Anand Rathi Financial

Services. "The immediate impact of

terrorism is the loss of life, destruction of

property and loss of man-days. Terrorist

acts also cause uncertainty, which impacts

economic activity. Tourism is one of the

first areas to be hit, with hospitality and Does that matter??

transportation feeling the pain the most. Gross earnings from foreign tourists are

currently around 1% of GDP. A marked slowdown in tourism activity will have a

perceptible impact on not only the hospitality and transportation sectors, but also

on the overall economy.

"The impact on the earnings side (through lower room occupancy,

depressed room rental, lower passenger traffic or lower air fares) may eventually

reverse once the situation normalizes. On the expenditure side, though, the

impact of higher costs from increased preventive arrangements and higher

insurance premiums is likely to be more permanent." An important subset of

tourism -- medical tourism -- is also likely to slow in the short term.

"Hospitality and tourism are two sectors that will certainly take a

direct hit," says Chakrabarti of ISB. "This will be a gut reaction to the event and, if

nothing else happens, then things will soon get back to normal." According to

Rangar, "Estimates suggest that nationally hotels have seen about 60% booking

cancellations." Holiday destinations such as Goa are feeling the pinch even more

because of intelligence reports that they could be future targets for terrorists.

Hotel occupancy in western India is down some 25% and rates have plunged. Civil

aviation is another sector in the dumps. But it was already troubled before the

attacks.

Rangar believes the overall damage to India's economy could be

significant. "Analysts have already started giving initial estimates that suggest the

loss in business due to the attacks would be about $100 billion, arising from crucial

institutions, such as the stock exchanges, commodities and money markets, and

business and commercial establishments which remained closed," he notes. "There

is also a hit of $20 billion on the foreign exchange front. But though the numbers

are alarming, it is just a matter of time before the city and its people rise to face

the situation."

Exports, already down, could be further hit as foreign buyers put off

visits. "International clients prefer to stay at five star hotels such as the Taj and the

Oberoi," says Ganesh Kumar Singh, president of the Federation of Indian Export

Organizations. They now see a risk staying at any five star hotel. The U.S.

commercial nuclear mission has put off its India trip as have delegations from

several other countries.

The perception of increased risk in India could also impact the IT

industry, which depends on client visits to seal deals. But the larger firms in the IT

industry have already spread their risk; they have back-up operations in other

countries such as China. The effect there will be only temporary. Some analysts,

however, believe that the business process outsourcing (BPO) industry may not be

so lucky. "Oil & gas and other large operations are vulnerable to attack," says the

Anand Rathi report. Beefing up security will add to their costs. But these are

strategic industrial assets for the country as a whole, and part of the expenditure is

likely to be borne by the government.

Does anybody gain? Certain lines of IT, particularly those related to

security, will get some benefit. "Companies catering to defense, security and

surveillance needs are likely to see a boost in demand," says the Anand Rathi

report.

Rangar ends on a note of confidence. "Despite the slowdown -- and the

recent incidents -- global companies are expected to continue to exhibit their

confidence in India," he says. Adds Chakrabarti: "The confidence crisis is far worse

in other parts of the world compared to India. Foreign investors need to put their

money somewhere and India still looks very attractive. At worst we will grow at

6%. Most countries would die to grow at this rate at this point in time."

TERRORISM IS HOLDING BACK INDIAN ECONOMY

World in recent past, has witnessed several economies burning with disaster &

crisis. Today every nation faces some or the other economic, social or communal

unrest. Further, globalization has enabled the impact of these tremors to be felt

even at remotest part of the world. India till FY 2008 had seen a steady growth

with its GDP shining as high as 9.3%. Subsequently, the economy was hit with US

Sub Prime Crisis, Satyam scandal & the Mumbai 26/11 Terrorist attacks.

Many believe that

terrorism can't hamper ones economic

activity as it only destroy a small

fraction of the stock of capital of a

country. However, a broader look at

the geo-political & economical

scenario can easily erode this

misconception. India has been facing

the terrorism threat as long as since

1970. Terrorism in India is primarily

attributable to Islamic, Naxalite and

various other radical movements. At least 232 of the country’s 608 districts were

afflicted, at differing intensities, by terrorism. Over a period of time terrorism has

severely affected Indian economy. Following are the issues that had been major

hindrance for Indian economic growth:

A] SHORT-TERM IMPACT

1) Loss of Human Capital

The human costs have been horrendous. Estimates are in past 5 years

4000+ were killed in terrorist attacks. This puts India next to Iraq both in terror

deaths and terror incidents. The recent 26/11 Mumbai attacks itself left 257-300

dead and 700 injured which includes several high profile individuals such as Shri

Ashok Kapur, chairman of Yes Bank who was killed in attack.

2) Investor Behavior

Frequent attacks on commercial & government institutions shatter

the confidence of the investors causing heavy investment drainage. One example

of the same is the terrorist attack in Indian Parliament in 2001, which

internationally provoked insecurity & discouraged the investors (FII's & FDI's),

obstructing the economic growth. A heavy impact of this can be observed at the

stock market that keep diving down post any major terrorist event.

3) Short Term Financial Loss

In short term the obstacles like loss suffered due to the diversion of

business away from the city to other locations, lost earnings of public due to

disability and trauma among survivors etc. drains out the productivity levels &

impact the respective economy adversely. Post 26/11 the Taj & Trident Hotels

incurred heavy loss as operations were halted for 3-4 months. After 26/11 Mumbai

attack Pak cricket team had to cancel its Mumbai tour due to which BCCI has

incurred a loss to the tune of INR 120 crore. Another such incident was Post Ex-PM

Indira Gandhi's assassination 1984 riots which hit the economy severely especially

the Agriculture & Transport industry that lost hundreds of crores.

4) Retrenchment effect on Specific Industries

The Jaipur serial blasts, J&K Terrorism & Mumbai 26/11 attacks did

have immediate and concentrated impacts on a number of industries: most

notably, airlines, aerospace, travel, tourism, insurance, lodging, restaurants,

recreation and related activities. Gross earnings from foreign tourists are currently

around 1% of GDP. Post 26/11 terrorist attack estimates suggest that nationally

hotels have seen about 60% booking cancellations. Hotel occupancy in western

India is down some 25% and rates have plunged. These industries suffered

concentrated economic and job losses. Of course, regions or localities with heavy

concentrations of these industries suffered disproportionately as well.

B) LONG-TERM IMPACT

1) Political Instability

The assassinations of 2 Ex-PM of India, Mrs. Indira Gandhi, and Mr.

Rajeev Gandhi already had jolted Indian politics & economy at large. India had lost

2 of its strongest pillars which otherwise would have taken Indian politics,

Business & industry at unimaginable heights. Recently speaking the siege of South

Mumbai has taken toll as home minister Shivraj Patil, Chief Minister Vilasrao

Deshmukh & Home minister R.R. Patil had to resign. This further unstabilized the

Indian industry from a long-term perspective. The Political instability at times

have also let to erosion of FII's & FDI's.

2) Global Implications

India, post Kargil war then Attack on Parliament now 26/11 has lost

millions of business as the trade link between the two countries are frozen during

such period. Agri-Exporters in bordering states have taken heavy burns. This has

resulted in unemployment in these regions, which in turn again triggers riots. 26/11

Attack involved foreign hostages and places where business leaders, executives

and foreigners frequented. This will lead to a drop in investments.

3) Long Term Financial Loss

The direct economic damage done by terrorist attacks: buildings and

infrastructure destroyed, productive lives ended. The structural damages post 26/11

attacks was amounting to total of INR 500 crores, which subsequently took its toll

on the insurance industry. Another form of longer-term costs security involves the

opportunity cost of spending additional money to fight terrorism. Currently India

ranks on 9th position in the world for highest military expenditure (2009-10),

which amount to sum total of USD 32,700,000,000. Further, a variety of new

spending on security occurred after this incident. As all this happens, economic

resources will be directed to shoring up security and diverted away from more

productive private sector activity.

To conclude with, let’s not forget that the enemies of our nation have

vowed to "bleed India through thousand cuts". Even if terrorism represents a small

fraction of the overall economic risk in India, it may have a large impact on the

allocation of productive capital across the country.

Post 26/11, India turns to Russia for small weapons

India, which has been procuring fighter aircraft and missiles worth

$1.5 billion annually from Russia, is now looking to buy small weapons too - like

assault rifles, sniper guns and automatic grenade launchers - for its paramilitary

forces, especially after the 26/11 Mumbai terror attack.

So far, India has largely depended on Israel for sophisticated weapons,

guns and equipment to meet the challenges of internal security.

A Photo Which Depicts Everything But WE CANNOT CALL IT A KODAK MOMENT

According to Leonid Nikolay Skofenko, head of KBP Instrument

Design Bureau in India, the firm was approached by officials of India’s elite

commando force National Security Guards (NSG).

“Post 26/11, the National Security Guards approached us to buy

automatic grenade launchers under direct sale. They had used the same in their

Mumbai operations, but at that time they had taken it from the army,” Skofenko

told IANS at Defexpo 2010.

“Earlier we had supplied the grenade launchers to the Border Security

Force (BSF) and the Central Reserve Police Force (CRPF) under a contract in

August last year. Now under the option clause we would supply the automatic

grenade launchers to the NSG and the Indo-Tibetan Border Police (ITBP),” he said.

The KBP Instrument Design Bureau is one of the leading design

companies in the Russian defence industry.

The 30 mm automatic grenade launcher is handy because of its light

weight. One trooper can carry the grenade launcher and mount it. The rate of fire

per minute is 400.

Skofenko said they would be bidding for the NSG tender for sniper

rifles too. “The NSG has floated a tender for sniper rifles. We are pitching for our

anti-material rifle (OSV-96 sniper rifle). It can be used against troopers and is also

designed to engage targets like light armoured vehicles at a distance of up to 1,800

metres,” he said. “We would also be supplying these rifles to Marcos (Indian Navy

commandos),” he added.

Besides, his company is also bidding for a NSG tender for magazine

grenade launchers - a hand-held launcher that can be used inside buildings during

assaults.

“The NSG says they may consider buying our magazine shotgun,” he said.

Andrey Baryshnikov, of another Russian defence company Izhmash, said they have

brought a series of AK assault rifles to India - AK-101 to AK 104.

“We intend to sell AK-101 to AK-104 rifles to India. These are technologically

advanced rifles as compared to the AK-47 and AK-56 (Chinese). We are making a

proposal to the Indian government that we can produce these rifles in India under

a licence system.”

“We are also looking for joint ventures with India companies. The Indian

Ordnance Factory Board is making Insas (Indian National Small Arms System)

rifles. But they are not producing it in enough numbers and the quality of their

weapons has to be improved. We are ready to meet all requirements,” he said.

Baryshnikov said around 60 countries, including Thailand, Vietnam and Indonesia

are using their AK rifles. Russia does not sell weapons to Pakistan.

Post-26/11, US more committed for biz with India

Washington In a bid to restore investors' confidence after Mumbai

terror attacks, the US-India Business Council (USIBC) has presented an optimistic

assessment of the security situation in India, saying it is committed to doing trade

with the country.

Government Security Officers from the American Embassy in India on

Saturday shared with USIBC member-companies a cautious but upbeat assessment

of the security situation in Mumbai, as life in India's financial capital returns to

normal.

Representatives of the Taj Group of Hotels and Oberoi Group of

Hotels, who also joined in the USIBC members-only tele-conference, indicated

that sophisticated security measures had been put in place since the November 26

attacks on Mumbai, reassuring future visitors and hotel guests.

The Taj and Oberoi properties will reopen for business on December

21, it was reported, the USIBC, a premier business advocacy group, said in a

statement."It is a testament to the resilience and courage of the people of Mumbai

how quickly India's financial capital has returned to normal. It is equally

remarkable how India has demonstrated such restraint in so far as its relations

with Pakistan in the wake of the Mumbai attack. For USIBC, this must mean a re-

doubled commitment to doing business with India," Ron Somers, President of the

USIBC, said.

"The correct response to this heinous act is for the US business

community to get right back on jet planes as soon as possible to renew our

engagement and partnership with India," he said.

We are safe till they are there

Security market soars after Mumbai attacks

India's IT sector has stepped up surveillance measures and introduced

integrated security products as safety concerns rise across the country.

Earlier this month, Nasscom (India's trade body and chamber of

commerce for the IT-business process outsourcing industry) sent out invites for

the India Leadership Forum 2009, to be held in Mumbai in February. A note at the

end of the invite said: "At Nasscom, we understand the security concerns that you

might have following the unfortunate incident at Mumbai. In all our conferences,

we ensure that the security measures are stringent and foolproof to the best of our

ability."

V. Rajendran, vice president, HCL Securities, told ZDNet Asia, since

the Mumbai attacks of Nov. 26 (26/11), "securing lives and property has emerged as

a key concern in India". As a result, companies, hotels, retail chains and banks are

seriously considering security products and services that offer enhanced security.

"After the recent terror attacks, there is growing emphasis on

deploying technologically-enabled security systems both in the public and private

sector," Rajendran said in an e-mail interview.

Sivarama Krishnan, executive director, PricewaterhouseCoopers told

ZDNet Asia in a phone interview: "Post 26/11, companies and the government have

begun to look beyond IT--at the physical infrastructure." Their focus is now on

three key areas--security of the physical infrastructure, the resilience of the

security system and the disaster recovery mechanism they have in place.

The IT industry is taking the security issue even more seriously. Raju

Bhatnagar, vice president, Nasscom noted: "The added impetus for the IT sector is

that it is a highly visible industry segment and very people intensive."

Stepping up security

The immediate impact of the Mumbai attacks is felt on the physical

security at offices, malls and other public places. Krishnan said: "Earlier, anyone

could walk into a commercial building. But today, there are several security

checks. Guards are even asking visitors to show their identity cards."

In fact, Nasscom is in the process of collating some best practices that

can be circulated to its members to help create awareness. According to

Bhatnagar, companies have instituted three key security steps post 26/11:

1. Closer checks on vendors and suppliers visiting office premises. Such visitors

are asked to provide adequate details so that the individuals can be

identified when they are within the office.

2. Background checking on new recruits is being given a greater importance.

The National Skills Registry system to ensure individuals employed by

organizations have their background and antecedents verified to prevent the

menace of fake resumes, is being made mandatory by many companies.

3. Entry and exit rules--such as recording one's arrival in the visitor's register--

are being enforced more strictly. In many organizations, visitors are escorted

from the reception to meeting place and then back to the reception.

Following the terror attacks, large IT companies had approached

the Indian government for CISF (Central Industrial Security Force) protection to

their facilities. CISF's role was to guard only public sector units. Recently, the

Indian government (through an ordinance) allowed CISF to guard private

installations.

On its part, the government too is busy exploring new systems for

increased security. As per reports, scientists are evaluating a state-of-the-art

embedded security system to safeguard busy railway stations across the country,

some of which had been targets of terror attacks. The security system comprises 14

sensors that carry out surveillance and detection activities and would help do away

with frisking of people. One sensor even detects explosive material using Raman

Spectroscopy. New products hit the market

Rising security concerns are boosting the demand for products

that integrate the existing security systems to offer better surveillance.

Krishnan said: "In the past, there were technologies. But they were

installed in a dispersed manner. Today, these are being integrated to offer more

effective and real-time surveillance." Integrated security solutions leverage

technology to analyze incoming video information from cameras, pinpoint

potential threats, and escalate information through the established IP

infrastructure to appropriate personnel or systems.

For instance, HCL Security recently introduced a unique concept--

called "Safe State". It is an architecture leveraging technology to build a security

framework that can safeguard life and infrastructure. It can help secure vulnerable

areas such as hotels, hospitals, IT companies and outsourcers, educational

institutions and railway stations.

Rajendran explained: "Safe State integrates technology with the

physical surveillance and security solutions, making them work together."

While there is no official data available that could indicate the

accurate size of the market today, Rajendran noted a study by Frost and Sullivan

that estimated the security surveillance market at US$407 million to US$509

million.

Naren Nagpal, chief executive officer, ReadiMinds, told ZDNet Asia:

"Post the Mumbai attacks the market size of the security products industry has

probably seen a significant change." ReadiMinds specializes in transaction security,

fraud prevention, real-time risk monitoring and mitigation, and emergency alert

systems.

Prior to 26/11, ReadiMinds primarily served the BFSI (banking,

financial services and insurance) industry. "Post 26/11, we have also introduced our

real-time electronic surveillance systems in India for homeland security

applications," Nagpal said in an e-mail interview.

Investors worry about another attack after Mumbai

The risk of militants striking again in India worries many investors

who fear that a second attack similar to last year's Mumbai raids could shake what

has so far proved to be a resilient economy.

In some ways, last year's attacks in which Pakistani-based militants

killed 166 people appear a distant memory. While they ratcheted up tensions with

Pakistan, they failed in a principal aim -- to bring the two nuclear-armed foes to

conflict.

Foreign investors bought more than $15 billion in Indian shares this

year, helping local stocks gain nearly 80 percent, in a vote of confidence for the

trillion-dollar Indian economy.

But the Mumbai raids forced investors to consider that any new

attack could spark regional tension and panic in an economy that is just recovering

from the global economic slowdown.

"While India has made some improvements to its counter-terrorism

capabilities, it remains vulnerable to terrorist activities," wrote Maria Kuusisto of

Eurasia Group.

"Another high-profile, mass-casualty attack would lead to intense

domestic pressure on Delhi to adopt a more firm policy towards Pakistan and even

retaliate, which would raise regional tensions."

Businesses in Mumbai, which was also a target in serial bomb blasts in

1993, lost about $800 million after the 2008 raids. The stock exchange was shut for

a day and hotels and airlines struggled as countries issued travel advisories.

Another strike in India could also prove a political distraction for a

government that is gaining traction with financial reforms in such sectors as

insurance and pensions.

Companies are now spending millions on revamped security, adding

to the costs of doing business in India. About 80 firms, including software

exporters, hotels and energy companies have applied for paramilitary cover.

"26/11 was big and we are constantly concerned about the safety of our

facilities, our workforce," S. Mahalingam, chief financial officer of Tata

Consultancy Services, India's top software exporter, told the Reuters India

Investment Summit in New Delhi this week.

STOCKS RESILIENT?

One follow-on militant attack nearly triggered war in 2002.

India and Pakistan, which have fought three wars, initiated the

biggest military build-up on their border in 2001 after an attack on the Indian

parliament that New Delhi blamed on Pakistan-based guerrilla groups.

But it was another attack on an Indian army camp in Kashmir five

months later that raised real fears the two nations may be on the brink of war.

Some embassies advised their citizens to evacuate New Delhi. A flurry of

diplomatic peace missions led by the United States eased the situation.

Indian markets have a mixed record of responding to attacks. In the

limited three-month Kargill conflict with Pakistan in 1999, the main stock index

actually rose -- by a third.

In 2001, stocks fell 8 percent in the two tense weeks after the

parliament raid but recovered losses in the next fortnight.

After the 2002 army camp raid, stocks, already hit by uncertainty

sparked by huge religious riots in Gujarat state, lost a tenth of their value in the

following eight days and did not recover for the rest of the year until tensions

began easing.

Seven years on from that, investors are drawn to India's near 7-

percent economic growth and promise of stability after the Congress party-led

government won re-election in May.

"The risk perception has certainly deteriorated. This, however, hasn't

deterred investors from participating in, and benefiting from, the India

opportunity," said Manoj Vohra, head of the Economist Intelligence Unit in India.

Investors simply have to get used to the new reality, Kevan Watts,

country head of Bank of America-Merrill Lynch, told the Reuters Summit.

"It is the reality all across the world. So you put your business

continuity plan in place, you put up as much physical security as you can, and you

just get on with your business."

India faces growing Chinese hostility after 26/11

As China strengthens its navy with acquisition of aircraft carriers and nuclear

submarines, India will soon find that unless it boosts its maritime muscle, it

will be strategically marginalised and outflanked by an assertive and

expansionist China, says G. PARTHASARATHY.

While India received overwhelming international sympathy and

support during the 26/11 terrorist outrage, the Chinese reaction was one of almost

unbridled glee, while backing Pakistani protestations of innocence. The state-run

China Institute of Contemporary International Relations claimed that the

terrorists who carried out the attack came from India.

Moreover, even as the terrorist strike was on, yet another Chinese

“scholar” gleefully noted: “The Mumbai attack exposed the internal weakness of

India, a power that is otherwise raising its status both in the region and in the

world”.

Not to be outdone, the Foreign Ministry-run China Institute of

Strategic Studies warned: “China can firmly support Pakistan in the event of war”,

adding: “While Pakistan can benefit from its military co-operation with China

while fighting India, the People’s Republic of China may have the option of

resorting to a strategic military action in Southern Tibet (Arunachal Pradesh), to

thoroughly liberate the people there”.

Rather than condemning the terrorists and their supporters, Chinese

Foreign Ministry Spokesman Qin Gang urged India and Pakistan to “maintain

calm” and investigate the “cause” of the terror attack jointly. The visiting Chairman

of Pakistan’s Joint Chiefs of Staff General, Tariq Majid, was received like a state

dignitary by Chinese leaders, with promises of support on weapons supplies

ranging from fighter aircraft to frigates.

US-China relationship

New Delhi should also have no doubt that China will exploit the

American economic downturn and the pro-Chinese views of Secretary of State

Hillary Clinton, to get the Americans to revert to the policies of the Nixon, Carter

and Clinton Presidencies and to make common cause with it on issues like nuclear

non-proliferation, the Comprehensive Test Ban Treaty and even on Afghanistan

and Pakistan, while undermining Indian interests.

Echoing the Pakistani line, the Communist Party mouthpiece, The

People’s Daily recently suggested that for the United States to deal with problems

in Afghanistan, it should not merely involve itself in the “Afghanistan problem”

and the “Pakistan problem” but also in the “India-Pakistan problem”.

Hillary Clinton has characterised the US-China relationship as the

“most important bilateral relationship in the world in this century”. Her visit to

China was followed almost immediately by the visit to Beijing of a senior Pentagon

official, who joyously proclaimed the resumption of defence ties with China.

The Bush Administration had an overarching strategic vision of its

relations with India, premised on India’s pivotal role in confronting terrorism,

safeguarding the sea lanes of the Indian Ocean and in promoting “strategic

stability” in Asia. With elections around the corner and the UPA Government in a

“lame duck” mode, Washington is unlikely to take any interest in fashioning a

larger vision for India-US relations.

The challenge we face in coming months is on how we can pursue our

interests in the aftermath of the 26/11 carnage, without making the Indo-US

relationship exclusively fashioned by developments our western borders. The

Obama Administration’s decision to curb outsourcing, without any prior

consultations, manifests an American propensity to act unilaterally and

peremptorily on issues of vital interest to India.

The Prime Minister’s Special Envoy Shyam Saran recently noted “an

apparent willingness on the part of the US to accommodate China’s regional and

global interests as a price to be paid for China refraining from tipping the US into a

full blown economic and financial crisis through its own policy interventions and,

hopefully, supporting US economic recovery”.

China appears set to exploit current developments to transform the

American dominated unipolar world order by a bipolar world order in which it

shares global hegemony with the United States. Saran perceptively noted: “This

will imply a more energetic pursuit of our relations with countries like Russia and

middle powers like Brazil, South Africa and Mexico. The European Union and, in

particular, some of its individual members like France, can be useful political and

economic partners”.

It remains to be seen if we can fashion imaginative strategies to deal

with these emerging challenges.

Mumbai attacks costs insurers Rs 500 crore: IRDA

General insurers may suffer a loss of over Rs 500 crore due to the

Mumbai terror attacks, according to the Insurance Regulatory and Development

Authority (IRDA).

“This is the biggest estimated loss to the Terror Pool since its

inception in 2002 and Rs 50 crore has already been released,'' IRDA said in its

annual report for the year 2008-09 which was released on Wednesday.

The companies would also have to pay more for insurance under the

terror pool as the rates were hiked on April 1, 2009.

Claim settlements under the terror pool were very low at Rs 1.05 crore

in 2007-08, while the premium collected was Rs 500 crore, IRDA said.

Luxury hotels, the Taj Mahal Palace and Oberoi Trident, were

targeted by terrorists on November 26, 2008, which claimed 200 lives besides

damaged property.

Terror cover premium hiked by 30%

Beginning April 1 2009 companies have to shell out more to buy an

insurance cover against terrorist attack.The insurance companies offering terror

cover decided to increase the premium rates by around 20-30 per cent, from April.

Claims against terror cover are paid from a pool made out of

contributions from all general insurers. The pool is managed by the General

Insurance Corporation of India (GIC Re). The terror pool has a corpus of around Rs

1,400 crore as on date. The pool provides cover for property loss or damage and

business interruption claims arising out of terrorist activities.

The decision to hike the premium has been taken keeping in view the

depletion of the terror pool on account of the payout to Hotel Taj Mahal Palace

and Tower and Hotel Trident-Oberoi in the aftermath of the Mumbai terror

attacks, said Mr Gaurav Garg, CEO and MD, Tata AIG General Insurance. Tata AIG

General Insurance is the lead cover provider to Taj hotel.

The decision has been taken by the pool and approved by the

regulator, said Mr Yogesh Lohiya, Chairman and Managing Director, GIC Re.

The terror pool has a good corpus as there were not many claims prior

to those by Taj and Oberoi. As more people are looking to buy a terrorism cover,

the corpus of the pool should increase, Mr Lohiya said.

An initial amount of Rs 25 crore was paid from the terror pool to both

hotel Taj and hotel Trident-Oberoi as an initial payment before the final damage

assessment was made.

The final payout is expected to be in the range of Rs 500-600 crore,

including business interruption claims, Mr Lohiya said. The final payouts are

expected to be released soon after the final survey and assessment are over.

“We are awaiting the final report of the assessment, which is expected

to be ready soon. The balance amount will be released only after the claim

processing is over,” Mr Garg said.

The Taj cover is provided jointly by three insurers — Tata AIG

General Insurance (65 per cent share), ICICI Lombard General Insurance (30 per

cent) and IFFCO Tokio General Insurance (5 per cent). In the case of Hotel-

Trident Oberoi, the cover is provided by New India Assurance Company and

United India Insurance Company.

Conclusion

“In any part of the world terrorism is unwanted as it

not only kills the human life but also the infrastructure, industry

ultimately shackling its overall growth”.

Bibliography

1. http://timesofindia.indiatimes.com/Opinion/SA_Aiyar_2611_a_buying_opportunity

_not_economic_disaster/articleshow/3932144.cms

2. http://www.financialexpress.com/news/26-11-a-deliberate-plan-to-hit-indian-

economy-prez/422733/

3. http://testfunda.com/ExamPrep/MBA-Resource/Current-affairs/Article/the-

impact-of-2611-on-the-indian-economy.htm?AssetID=b96be0a9-3d7c-4b98-b20a-

8a21ff204113

4. http://www.thehindubusinessline.com/2009/04/01/stories/2009040151750600.htm

5. http://www.thehindubusinessline.com/2010/01/08/stories/2010010853500600.htm

6. http://www.thehindubusinessline.com/2009/03/19/stories/2009031950270800.htm

7. http://www.indianexpress.com/news/investors-fear-about-another-attack-like-

mum/546497/

8. http://www.businessweek.com/globalbiz/content/jan2009/gb20090126_074594.htm

9. http://www.expressindia.com/latest-news/Post26-11-US-more-committed-for-biz-

with-India/400898/

10. http://www.zeenews.com/news604499.html

11. http://forum.testfunda.com/topic1227-terrorism-holding-back-indian-

economy.html

12. http://indianeconomy.org/2008/12/29/whither-now-india/

13. http://www.mustseeindia.com/articles/26-11-and-after-effects-on-tourism-in-

india/1128

14. http://forum.testfunda.com/topic770-impact-26-11-indian-economy.html

15. http://ttrammohan.blogspot.com/2008/11/mumbai-attack-and-its-aftermath.html