INDIA CHALLENGED AS MUMBAI TERROR STRIKES & SATYAM LIES

At a time when the world’s second-fastest growing economy is seen by many economists to be pivotal in reversing the global recession, two events negatively rocked India. The country’s commercial capital Mumbai was attacked by terrorists on November 26, 2008. That was followed on January 7, by a shocking revelation of a $2 billion fraud by the founder of India’s fourth largest IT Services company, Satyam Computer Services Ltd.

Mumbai is one of the world's top 10 centres of commerce and contributes about 5% of India's GDP, 25% of industrial output, 40% of maritime trade and 70% of capital transactions to the economy. Its per-capita income is almost three times the national average, though wide disparities exist among its 14 million population.

Each time the city has been targeted, however, it rebounds strongly and resolutely. Some view this as an apt representation of India’s underlying strength as a culturally-rich democracy and increasingly capitalist economy. On the first day of trading after the attacks, the Bombay Stock Exchange’s benchmark Sensex Index closed three quarters of a percent higher at 9097.92.

The Satyam incident, involving the misreporting of accounts, has put a dent in an otherwise widely acknowledged and respected corporate governance, quality and value of Indian companies. While India has a well-knit regulatory framework and institutions to ensure compliance, it is clear that they have been insufficient in preventing what is being dubbed as “India’s Enron.”