Terror Attacks Stagger the New Mumbai

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Political Finger-Pointing Begins

While the short-term impact is easy to imagine—a drop in tourism, extra costs for security—what happens down the line remains impossible to assess. "I'm confident business in Mumbai and in India will recover quickly from this challenge," says K.V. Kamath, CEO of ICICI Bank, India's second-largest by assets. "But the attack highlights the threat to the institutions of business that are an integral part of India's growth and its relationship with the world."

But India's economy, still a blend of Soviet-style socialism and upstart capitalism, depends far more on policy decisions taken by its central government than those of developed countries. The governing coalition must hold elections next year and is entering its lame-duck months burdened with the agony of repeated humiliations from terrorists, surging inflation, and an economic slump that threatens to derail growth.

The political finger-pointing has already started. Narendra Modi, the hard-line Hindu fundamentalist Chief Minister of neighboring Gujarat state, has stepped up his efforts to run for Prime Minister as leader of the Bharatiya Janata Party. On Thursday, even while the hostage situation remained unresolved, he showed up in Mumbai and asked local police to take him around the embattled areas in an armored car. The cops refused, but he called a press conference nevertheless, assailing the government for its failure to stop terrorism.

In Mumbai, the sun set Friday over the charred shell of the Taj Mahal Hotel, built in 1903 as an alternative to whites-only hotels that the British ran. Shots still rang out from its baroque balconies, and blood still stained its massive lobby, where tradition has it that the guards never stop anybody from taking a seat, no matter how impoverished they may look. Ratan Tata, chief of the sprawling Tata Group conglomerate and great-grandson of the hotel's founder, told reporters in Mumbai that his company would rebuild the Taj to its former glory. "We cannot replace the lives that have been lost and we will never forget the terrifying events of last night," he said. "But we must stand together shoulder to shoulder as citizens of India and rebuild what has been destroyed."

Srivastava reports for BusinessWeek from New Delhi. Lakshman covers India business for BusinessWeek.