Dubai debt crisis may hit Indians hard

Reacting cautiously to the financial crisis in the United Arab Emirates, caused by the debt repayment crisis of Dubai World, the Indian financial establishment on Friday said there was no visible impact of the shock as of now.

But there are fears that thousands of Indian expatriates in the Gulf could lose their jobs.

This has left thousands of Indian families worried, as the region accounts for half of the country’s $25-billion remittances. Gulf countries employ five million Indians, out of the 25 million total strength of the Indian diaspora in 130 countries, and Dubai being a key driver of the region’s economy, a shakeout there is seen unsettling the job market – and the incomes of relatives.”

“The Middle East meltdown has been there for the past one year. People have been coming back to India for the past one year,” said E Balaji, director of a leading headhunting firm, Ma Foi Management Consultants. “Now, there will be at least 25 percent contraction in the job market.”

The Indian stock market lost over 600 points initially, but recovered sharply to end with a 223-point loss as reassuring sentiments expressed by corporates, the finance and commerce ministries as also the RBI helped control the erosion.
While the government exuded confidence that the crisis, which pulled down stock markets across the globe, should not have any major impact on employment and exports, the RBI said that developments and the extent of the problem need to be studied.

Having asked his subordinates to study the impact and make necessary recommendations, RBI Governor D Subbarao said: “We should not react to instant news like this. One lesson that we learnt from the (global financial) crisis is that we must study the developments , measure the extent of the problem and hence study the impact on India.” The debt crisis in Dubai, Prime Minister’s Economic Advisory Council (PMEAC) chairman C Rangarajan said, might slow down remittances but would not have any impact on country’s growth.

Commerce Minister Anand Sharma said “the Indian real estate is doing well.”
Major real estate players like DLF, Unitech, Parsvnath Developers and Emaar MGF all said they had no exposure in Dubai, although Delhi-based Omaxe said it has an exposure of Rs 40 crore, which it has already asked for refund.

“Indian property market is very robust and largely dominated by internal demand. So there will be no adverse impact on us,” DLF Executive Director Rajiv Talwar said. The Dubai government promptly promised to pump in all necessary resources for success of Dubai World.