What could happen after Mumbai attacks

The government’s response to the rising threat of attacks is also seen as crucial to investor confidence, with a soft approach potentially damaging to foreign direct investment (FDI).

FDI rose 137 percent to US$17.21 billion in April-September and the government expects it to exceed US$35 billion this fiscal year.

PAKISTAN RELATIONS

In 2001, India blamed Pakistan for a militant attack on its parliament. The incident led to a tense stand-off between the nuclear-armed neighbors, with both armies facing each other “eyeball to eyeball” across the frontline.

Tensions have already risen this time, with India blaming Pakistani-linked elements for the attacks. Pakistan has responded by accusing New Delhi of playing politics.

While it would be a shock if Pakistan’s new civilian government were implicated in these attacks, analysts say the involvement of members of the Pakistan military’s spy agency cannot be ruled out.

In an attempt to defuse tensions, Pakistan has agreed to send a representative of its military spy agency to share information but later backtracked on a promise to send the agency’s chief, a move unlikely to calm Indian tempers.

India could step up its anti-Pakistan rhetoric, already accusing its neighbor of failing to rein in “the infrastructure of terror”.

The peace process which began in 2004 will at best be stalled ahead of Indian elections, if not go backwards.

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