25 April 2009


Does terrorism have a negative impact on our economy?

I simply don’t have the wherewithal to provide a quantitative response to that question. But I know, in most terror-hit places, economists and city planners have tried to assess the economic damage caused by terror attacks. For instance, the economic impact of the 9/11disaster in the United States is a case study among many scholars and governments. However, in India, research in this area is sadly neglected.

As a resident of Mumbai, I have been a silent witness to several terrorist attacks over the years. By ‘a silent witness’ I mean that, though I have not been ‘on the spot’, I have experienced the shock waves that have rocked the city immediately after the attacks, and those that have continued ever later. Moreover, my childhood memories of Marxist and Maoist insurgency in Calcutta still remain with me.

Apart from loss of life and injury to people (which is tragic enough), terror attacks leave a trail of fear, confusion and panic. Almost like a domino effect, people stop work, schools and colleges are closed, shops and offices shut down operations, factories and workshops stop production, and stock markets behave unpredictably, bringing down stock prices.

But, most important of all, terrorism creates uncertainty... uncertainty in the minds of people, and in the economy.

Specific industries are hit adversely: e.g. tourism and, therefore, travel and hospitality services. Foreign investment is reduced. Investments into, and plans to grow, local projects and industries are halted or delayed. There is loss of revenue due to drops in productivity in various sectors... and even in consumption.

How significant is this impact on the economy is difficult to tell. But there is no denying the fact that acts of terrorism have negative influences on a country’s economy.

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