Effect of terror attacks

Check this link -
http://online.wsj.com/article/SB122828423164375463.html?mod=googlenews_wsj
If we go by this article, the terror attacks in Mumbai are by themselves not going to have a major impact on the investments in India. While Indians may cheer it as great news and a measure of confidence on the so called "Great Indian Dream", I believe it is a lack of foresight.

The continuous acts of terrorism in India clearly demonstrate the lack of security and political will in India. Add to this the token and glamour based opposition from the people (candle light vigils, human chains) clearly show that the situation is not about to change very soon. In fact it would get worse. Especially for American and Israel based companies in India. Given the solid planning demonstrated in the current strike, it would not be difficult for the terrorists to strike selective targets. Targeting the factories that are in rural areas would even be easier.

There could be a few reasons for the international manufacturing companies not changing their plans
1. They already have invested substantial capital and pulling back now would be a major loss
2. They see India as an extremely cheap manufacturing destination. Given the current economic downturn, the companies might feel that the India cost advantage might make survival possible.
3. They plan to staff the Indian Operations with very few expatriates and so the death / damage would be of locals only.
4. Suitable insurance policies to take care of all possible financial losses.

I believe all the points are myopic.
1. As companies are reducing production, with new capacity in India coming up they would have to stop something. Either way capital loss is certain. The continued cost of keeping non operating plants in Europe / USA (pensions and other overheads) might work out to be substantial.
2. Given the lack of infrastructure the real costs of producing in India might be higher. The added security and insurance costs would also add up.
3 & 4. The disruption of supply from the India plant would be a huge loss. Especially in a recession based market. Competitors would take away the market share in the time in which the supply resumes. Getting it back would be very difficult and costly. No insurance policy or alternate manpower planning can reduce this loss.

My message - India is a huge risk proposition.