Fear of More Attacks Could Hurt Business in India

IDG News Service —

Mumbai is trying to limp back to normalcy after terrorist attacks last week left around 195 dead, and close to 300 injured. But there are questions whether foreigners will continue to take the risk of doing business in the city and the rest of the country, which have faced repeated terrorist attacks in the past.

"This attack is bound to create doubts in people whether it is safe to continue to do business in India, and one of the businesses that may be affected may be outsourcing to India," said Siddharth Pai, a partner at outsourcing consultancy firm, Technology Partners International.

Last week's attacks in Mumbai targeted two high profile hotels and other targets in south Mumbai, the country's financial hub.

In the short term though, Pai and other analysts do not expect multinationals who outsource to India, or have development subsidiaries in India, to close operations.

Microsoft Research India, for example, said last week that it is committed to operating in India.

There is however concern among business executives that despite numerous terrorist attacks in the country, the Indian government does not have the political will to handle the terrorist threat.

"Another attack may not be far away," said a businessman in Bangalore on condition of anonymity.

In India, businessmen and executives usually hesitate to criticize the government. It is one of the largest buyers of many products including IT. Indian businesses often need to lobby the government on a variety of issues from tax holidays to duty rate cuts, to changes in government policies.

Ratan Tata, chairman of Tata Sons, on Thursday however criticized the handling of the terrorist attack by the authorities.

"We should have learnt to get a crisis infrastructure in place that could snap to attention as soon as something happens," he told reporters in Mumbai. "We still don't have that in place."

Taj Mahal Palace & Tower hotel, one of the targets of the terrorists, is a business of the Tata group. India's largest outsourcer, Tata Consultancy Services, is also part of the group.

"My message is that if we are living in this kind of environment, we need an infrastructure that will cope with this," said Tata who added that the fatalities in the attack last week could have been minimized.

The terrorists were highly trained and used technologies such as satellite phones, global positioning systems (GPS) and maps from Google (GOOG) Earth, according to police.

The government has responded so far to criticism from the public by accepting the resignation on Sunday of the country's home minister, Shivraj Patil. But it is being seen as too little, too late. Patil's resignation has been repeatedly demanded after bombs planted by terrorists went off in Mumbai, Ahmedabad, and Bangalore earlier this year.