Expert view: India’s economy will rebound from this

As we try to come to terms with the vivid television images of the appalling terrorist attacks in Mumbai last week and the heartbreaking funerals of the victims held in India, Israel and elsewhere, it is difficult to visualise a time when India’s financial centre will return, once again, to something approaching normality.

Whilst our first thoughts must be with those who have been savagely murdered or injured, we cannot ignore the psychological impact these events will undoubtedly have on the wider Indian population, including those involved in business. The mixture of shock, anger and fear is palpable even from the relative security of London.

But Mumbai will recover. We only need to look at the recent experiences of cities like New York, London and Tel-Aviv to understand this. In some respects, it is quite unnerving how quickly people begin to put these kinds of events behind them, but that is a natural response as they try to get on with their lives.

In the short-term, there is no doubt that the Indian economy will be affected. According to the Investment Commission of India, travel and tourism accounted for US$41.8 billion of revenue in 2007, representing approximately 5.3 per cent of GDP. The latest reports suggest that 15 per cent of overseas visitors have already cancelled their trips to India. That number will grow. If people are reluctant to visit India, this is likely to affect investment decisions as well. Then, of course, there is the added impact of the global slowdown.