The deplorable terror attacks at Mumbai threaten to further shake business confidence in India at a time when companies across industrial sectors are struggling to cope with severe erosion in demand and profitability and the economy is straining to overcome the pressure of the global economic crisis.
The planning, scale and execution of the attacks, which have left over a hundred dead, are mind boggling. By targeting two major hotels and taking hostages, the terrorists have sent a clear signal that they have moved beyond serial bombings.
While Indian corporate leaders are putting up a brave front, I suspect there are many are questioning the government's ability to contain such attacks.
The attacks in Mumbai comes after a series of bombings at other cities across India in the last few months. Many have criticised the government for not having stricter anti terrorism laws. And this is likely to emerge as a major issue in the general elections that are due next year.
There are expectations of a further depreciation of the rupee which has lost 13% of its value against the US dollar in the last three months. And the stock market could also fall when it opens for trading tomorrow, say many analysts.
Foreign investors could turn cautious and delay investments till they have greater confidence in the economy. This would be at a time when the country is looking to boost capital flows.
Let's hope that the government has learnt a valuable lesson and acts swiftly to contain the damage of this dreadful attack.