The Departure Lounge

War clouds have cast an ominous shadow over the West's trade and tourism relationship with India. American fears about investing in and travelling to a region once dubbed by ex-US president Bill Clinton as the "most dangerous place in the world" were ratcheted up several notches by an advisory from the state department urging all US citizens in India and Pakistan to evacuate. Those planning a summer vacation to the region have also been advised to defer plans.

Many apprehensive US businessmen are already adopting a wait-and-watch policy. This caution has resulted in a great deal of disappointment in the Indo-American business community. Some even suggest the US government advisory bordered on "paranoia". "When the state department issues a diktat, these guys just shut down. It's a very disappointing situation," seethes an Indian businessman, requesting anonymity.

Agreeing that it is an "unfortunate panic call", Kailash Joshi, Silicon Valley-based president of The IndUS Entrepreneurs, predicts there will be some slowdown in business development and says the timing is unfortunate as India's economy had just started to regain momentum. "There will be some hesitation from the US business community which does not have the same gut-feel for the situation as those of us born in India," says Joshi.

He feels that it is essential to assure Americans that the situation in the subcontinent isn't as grave as is being made out. As Joshi says: "The southern parts of India are where the predominant 'offshore activity' takes place, and they are significantly removed from areas of concern in the north."

American IT firms are perhaps the most concerned by the developments. They worry that if a war does eventually break out, back-end operations in India could come to a grinding halt. "These IT professionals really have a lot at stake here," says an Indian official.

Michael Clark, executive director of the US-India Business Council, while confessing that the US business community was watching the situation with "a great deal of prudence", says: "Very few of us believe the notion that a major war is imminent, but the fact that it can't be ruled out just cannot be ignored." Clark says that while it's business as usual on the ground, there is a decision by US industry in most areas not to begin new projects yet so as "to pause and see how things develop".

"It'd be fair to say that some of us are concerned that the US press is creating a storyline that's misdirecting the focus," says Clark, adding that "there are real concerns, but what's being said is beyond what we see as core issues or the most immediate concerns."

But even with all this, the Indian business community's commitment to do business with the US has remained markedly unaffected. Kiran Pasricha, senior director at CII, cites scheduled visits to the US by two business delegations later this month as indicators of this normalcy. But Rajiv Khanna, New York-based president of the India-America Chamber of Commerce, dismisses the significance of these visits: "I discount these visits from India which take place around this time of the year. These delegations usually come here to avoid the summer heat at the Indian taxpayers' expense."

The business that's been hurt most is tourism. Says Jodi Dell Leblanc, director of sales and marketing (the Americas) at the Taj Group of Hotels: "After 9/11, everyone who was planning to go on an exotic honeymoon, or on a yoga junket to India, postponed their visit. A lot of people are hesitant now about travelling due to the state department advisory."

Some US travel agents, though, dismiss these departures of US citizens from India as "routine". With schools in India closing for summer, many American expats were already scheduled to head back home". There isn't a mass exodus," Dell Leblanc agrees. "A very small amount of leisure travel to India takes place during the summer months. Americans tend to go to India between October and April."

Others aren't so optimistic. Saying there has been a "definite drop" in travel to India, Vinay Kapoor, manager at the New York-based Travel Center, adds he has been inundated with frantic calls from people wanting to know about cancellation charges. "A lot of people are scared," he admits.

Figures on the ground show that foreign tourist arrivals in India dropped 12 per cent in May. Hotels, which anyway have only occupancy of between 30-60 per cent in the summers, are now reeling with 25-30 per cent figures, Delhi being the most affected. Some travel agencies have recorded 60-70 per cent cancellations. Says Arjun Sharma, MD of the Delhi-based Select Holiday Resorts: "The situation is very serious. Those currently travelling are cutting short their trips and fresh arrivals have been reduced to a trickle. We haven't seen a May-June this bad in a decade."

One five-star deluxe hotel in Delhi saw a group of over 100 leave within hours of checking in when they heard of the travel advisory, while another saw three of their long-stay clients (who stay for over a couple of months) pack up and leave last week. Some of the airlines are also not risking crews for night halts in India—big losses for hotels that depend a lot on the business.

The travel industry now fears a long-term impact. "This is the time of the year when plans for October-December are negotiated...why would any agent take a risk and send people to India?," asks Vijay Chadha, COO of Delhi-based BTI Sita. India isn't a spur-of-the moment destination. So he feels that if the current fear psychosis does not die down, India might have to say goodbye to the peak season as well. Meanwhile, visa restrictions imposed by the UK and Australia due to lack of staff is also hurting outbound travel.

On an optimistic note, the travel industry argues that tourists who have spent dollars coming here are reluctant to cut short their holiday. "Do you find any threat on the streets of Delhi? Tourists who have spent money feel they have to get their money's worth and are staying back," says Subhash Goyal, president, Confederation of Tourism Professionals of India. Says tourism consultant Rabindra Seth: "These travel advisories impact only the diplomat crowd which is anyway only in the hundreds. It's a knee-jerk reaction, it's too early to call it a disaster." But there have been a few cases already of Indians being offloaded by airlines at the airport because they had to accommodate citizens of their own country fleeing India.

Says Clark: "If there is a silver lining to all this, it is that through this process there will be clarity in South Asia and a much steadier, sustained engagement by the parties. That should be reassuring to US business and to those indirectly engaged in business in India, particularly in the services side."

Hewlett-Packard, which has about 2,600 employees in India, has issued a travel warning to its staff, saying anyone visiting the country must get senior management's permission. Intel, with 1,200 people in Bangalore, has taken a similar approach. Spokesman Chuck Mulloy says: "If they need to go, they can talk to their managers, but we're encouraging staff to hold off," he says.

"No businessperson likes war. It's bad for business," says Rajiv Khanna. A truer line has never been uttered.