News: 'Indian economy to stand tall'

(TT 13/07/2006) New Delhi - Finance minister P. Chidambaram today said neither adherents to the India growth story nor foreign investors will run for cover after the train blasts in Mumbai.

“The India growth story is still intact. Investors should continue to repose faith and confidence on the Indian economy. The confidence is still there,” Chidambaram said.

However, the rupee slid against the dollar today, closing sharply lower at Rs 46.23, though still above the three-year low of Rs 46.57 in May.

The last time when Mumbai was ripped apart by serial blasts, in 1993, delegations had to travel abroad to soothe panicky investors.

Analysts, however, said the India story was here to stay in a world attuned to terror attacks that can strike in both rich countries and in poor nations.

According to data released today, Indian industry exceeded expectations to post a 10 per cent growth in May on the back of a 11.3 per cent growth in manufacturing.

“These cowardly and dastardly attacks cannot break our will ... One solitary attack cannot set back economic activity all over India or in Mumbai. India is a very large country and economic activity takes place across the country,” the minister said.

The economy is expected to grow by 7.5-8 per cent this fiscal, propelled by a normal monsoon and buoyant industry and service sectors that are expected to run at a fast clip.

“As long as industry and manufacturing are strong there is no reason to worry,” he added.

The bourses seemed to accept Chidambaram’s logic with the benchmark BSE sensex rising sharply by 315.17 points, though analysts attributed this to good guidance from tech major Infosys in its quarterly results.

Analysts, however, believe that the financial markets will tread cautiously with an eye on government manoeuvres against terrorists.

“The bomb attacks do increase terror risks in the eyes of both investors and insurance firms,” said financial analyst Sudatto Sen.