Can India steer clear of Dubai financial crisis?

A new crisis is growing by leaps and bounds and at this time it is found in Dubai, port city in the United Arab Emirates on the Persian Gulf, known as the real estate hub of the globe. Hordes of latest reports suggest that the past glory of the city is hardly left in the city and the saga of property boom has ceased to exist already. What will be its effect on India then?

Even though it is not known yet, the Indian government seems to be confident and has already stated quite strongly that the financial crisis in the Gulf country would fail to exert any influence on Indian economy including real estate and exports. Nevertheless, India is keeping an eye on the entire development.

It also seems that the RBI may ask all banks to reveal their exposure in the Dubai World, the government investment company with liabilities of $59 billion. The firm has sought rescheduling of its debt repayment.

Union Commerce and Industry Minister Anand Sharma told press and media: “The Indian economy is large and I don’t think developments in the real estate sector in Dubai are going to impact it. Besides, the Indian real estate is doing well,” he said.

But how can we be so sure? One of the reasons of concern is that United Arab Emirates is one of India’s largest export destinations with shipments of about $24 billion in fiscal 2008-09 and any crisis in the same region may have an effect on India too.

In accordance with the Indian Finance Ministry, the crisis, actuated by a slump in real estate, may not impact remittances sent by Indian expatriates in the Gulf. “Remittances from expats didn’t suffer during the period when the larger crisis was on. So whether this should have an impact in terms of employment, in terms of salaries and therefore in terms of remittances is somewhat unlikely,” Finance Secretary Ashok Chawla told journalists in New Delhi.

It seems important to mention that India gets nearly a quarter of its total remittances from the UAE.