The Economic effects of the Mumbai Attack in India

The Economic effects of the Mumbai Attack in India

Introduction

Mumbai was once again the victim of a brutal terrorist attack, with three Improvised Explosive Devices (IEDs) detonated within minutes of each other in crowded business districts of India's commercial capital. At least 21 people were killed and more than 140 injured yesterday by a coordinated bomb attack at three different locations in Mumbai, India's largest city and financial center. The bombs appear to have been set with the aim of causing maximum casualties. They targeted three well-frequented areas in the center of the city and exploded within twelve minutes of each other during the evening rush-hour.

Economic effects of the Mumbai Attack in India

The commercial capital of India, and an emerging global financial hub, Mumbai has been subject to a disproportionately large number of terrorist attacks over the last two decades. However, its status as India's leading investment destination and the poster child for a globalizing India somehow continues to remain unthreatened. Editorials and news channels suggest there is an intangible 'Spirit of the Mumbaikar' that keeps the city going. The reality is far less romantic. Simply put, commerce in Mumbai does not care about terrorist threats.

The performance of the Bombay Stock Exchange's 30 share index, the 'Sensex,' best illustrates this immunity. The table below describes the performance of the Sensex on the first trading day after five major terror strikes. While the Sensex dipped in early morning trade, on none of the occasions did the index suffer large, sustained sell-offs. This is in stark contrast to the 9/11 attacks in New York, when America's stock exchanges panicked.

Date

Event

Sensex Close on Attack Date (INR)

Sensex Close on Next Trading Day (INR)

% Change

12-Mar-93

13 blasts across Mumbai, including Stock Exchange

        2,361

                 2,421

3%

25-Aug-03

Car bombs in tourist, business areas

        4,005

                 4,206

5%

11-Jul-06

Serial ...