Several years ago I had an occasion to go on a mission for the IMF to the Central Bank of India, headquartered in Mumbai. It was the second week of December, so it was past the rainy season and the weather was warm, with temperatures in the high 80s and low 90s. That India is the scene of so many incidents of unrest and violence should not be surprising. The wide disparity of income plus the long history of the caste system and discrimination against various ethnic and religious groups is a hard legacy to shake. Poverty hits you even as you land at the airport in Mumbai. At the end of the runway were many acres of tents made out of black plastic garbage bags, which were homes to many. It hits you again on the drive into the city from the airport. A similar sight awaits you in downtown Mumbai from the Central Bank of India, which overlooked a similar several-acre tent city.
Because it was the dry season, work had begun on road repairs. Instead of dump trucks, however, I saw on the way in from the airport many women dressed in colorful saris, each with a basket of dirt on her head, performing the dump trucks’ tasks.
We stayed at the huge Oberoi Hotel, which was one of the main sites of the recent terrorist attacks. The hotel is located right across from a major street adjacent to a seaside harbor and beach area. The problem with the beach, however, was the pollution, which plagues much of the water and permeates the air around Mumbai, since the ocean is the main repository for garbage and sewage.
The main entrance to the Oberoi is on a small oval drive with very large men serving as gatekeepers, wearing turbans suggesting they are Sikhs. The lobby itself is one floor up for security reasons and to separate patrons from common street people. After a few days there, for example, it became clear that a woman who greeted our taxi as it entered and left the drive, asking for coins, lived with her small child next to one of the large flowerpots decorating the Oberoi’s driveway entrance.
The Oberoi’s main lobby is spacious, and the interior reminds you of a Hyatt because the entire inside is open to the top, with balcony rooms encircling the atrium. I will always remember this atrium, for while we were there a 40-foot Christmas tree, resembling a Norfolk pine, was erected and decorated. Christmas carols wafted through the entire area provided by a trio of Indian musicians on piano, violin, and cello. It seemed incongruous at the time, especially given the warm weather, but must seem even more out of place now.
In the atrium lobby is a restaurant in which my friend and I ate nearly every meal. At that time we were concerned about health and avoided going to places where water-quality or food risks were high. This restaurant is where the first of the mass killings reportedly began. Off to one side is the long entrance to a shopping wing, where there is an exclusive restaurant and high-end stores selling rugs, jewelry, and clothing. This is where the terrorists next herded the hostages they had taken and began killing bystanders, including some in the restaurant. The distance between the two areas is great enough that under normal circumstances police should have been notified and already responded to the first shots that had dispatched the doormen on the ground. The terrorists then made their way up several floors. Since there were no elevators in that area, they had to have used a stairway. Again, more time must have passed, simply because of the distances involved before they began killing again, high up in the hotel.
We also ate one evening at the Taj – as it is usually referred to – because it was one of the other safe areas where my IMF friend felt comfortable dining. The Taj was a cab ride away – not a short walking distance – and was substantially more imposing than the Oberoi.
That such an attack by only about 10 people could take place in so many places throughout the city is astounding. The area is crowded and the places where the attacks occurred are not close enough to permit easy walking from one to another. Yet it is apparent that the terrorists hit one place and then moved to the next, but most likely only in groups of two. Little has been said in press reports about how the terrorists got from one place to another, but given the distances they could not have walked without detection and possible apprehension. Not only did they move about freely, it is also clear that they had selected their targets in advance. In view of what even a casual visitor might glean from having visited the area, there is a high probability that the terrorists had inside help or that the areas had been meticulously scouted in advance.
What has all this to do with investments? The vicious nature of the attacks and the political response to them would suggest that uncertainty has increased, but interestingly, Indian domestic markets hardly blinked. The potential links to Pakistan are worrisome and will likely impact relationships between the two countries, whether the links prove out or not. But again, it does not seem that investors, outside some who are directly involved in India, have been significantly affected.
Perhaps the world’s financial markets have become inured to the ongoing string of terrorist attacks since 9/11. This last event in Mumbai is only another in a sequence of terror events in London, Spain, Bali, and elsewhere. Perhaps they are viewed as an ordinary element of 21st-century life that may be dramatic and riveting in the media but that has few financial and economic implications.
Only time will tell if markets are becoming wrongly complacent about terrorism. But while that time elapses it seems that the monetary and economic implications of the events in India are minimal.