Effects of Terrorism in Indian Industries

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Impact on Industries

That's the macro picture. A sectoral analysis sheds more light on the possible damage to different industries. "Terrorism's economic impact has normally been short lived," says a report titled, Economic Impact of Terrorism, by securities firm Anand Rathi Financial Services. "The immediate impact of terrorism is the loss of life, destruction of property and loss of man-days. Terrorist acts also cause uncertainty, which impacts economic activity. Tourism is one of the first areas to be hit, with hospitality and transportation feeling the pain the most. Gross earnings from foreign tourists are currently around 1% of GDP. A marked slowdown in tourism activity will have a perceptible impact on not only the hospitality and transportation sectors, but also on the overall economy. "The impact on the earnings side (through lower room occupancy, depressed room rental, lower passenger traffic or lower air fares) may eventually reverse once the situation normalizes. On the expenditure side, though, the impact of higher costs from increased preventive arrangements and higher insurance premiums is likely to be more permanent." An important subset of tourism -- medical tourism -- is also likely to slow in the short term. "Hospitality and tourism are two sectors that will certainly take a direct hit," says Chakrabarti of ISB. "This will be a gut reaction to the event and, if nothing else happens, then things will soon get back to normal." According to Rangar, "Estimates suggest that nationally hotels have seen about 60% booking cancellations." Holiday destinations such as Goa are feeling the pinch even more because of intelligence reports that they could be future targets for terrorists. Hotel occupancy in western India is down some 25% and rates have plunged. Civil aviation is another sector in the dumps. But it was already troubled before the attacks. Rangar believes the overall damage to India's economy could be significant. "Analysts have already...
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