The risk of a multi-billion-dollar debt default by Dubai World, ranked among the largest state-run conglomerates in the region, has raised concerns in India like many other world economies.
The state-run Dubai World stunned the global financial world on Thursday when it announced it would need to restructure its debt, estimated at $59 billion, to preempt default and asked creditors for a six-month deferment.
The conglomerate, which has a host of companies under its fold, has interests in a wide range of businesses including realty, infrastructure, logistics and economic zones, not just in the region but across a host of countries including India.
Fears of economic slowdown could however be seen in the India stock market, like many other markets, on Friday. It dragged the Sensex down in the day's trading. The Sensex, after dipping nearly 600 points during the day, settled lower by 222.92 points at 16,632.01 points as funds remained aggressive sellers in realty, banks and IT segments.
There are fears that India's infrastructure companies may be especially hit as they have exposure to the Dubai economy and its once-booming real estate business. There are also some concerns regarding remittances to India from the gulf region. India receives a big amount from this region as remittance from its people working in Gulf.
However, before jumping to any conclusion it is important to understand the issue in a better manner by taking into account statement and opinion and experts and people who are in a position to throw some light.
India's Finance Secretary Ashok Chawla said on Friday it was too early to assess the impact of Dubai debt worries on the Indian economy and companies.
"We will have to study what the issue is, what the problem is, and what will be the possible implication, if any, for the Indian economy, people and corporates," Chawla told reporters.
Also, a majority of big real estate developers in India said on Friday that they are insulated from the financial crisis in Dubai and it will not have any impact in the country's property market.
DLF, Unitech, Parsvnath Developers and Emaar MGF all said they have no exposure in Dubai, while Omaxe said it has an investment of Rs 40 crore which it has asked for refund.
But Consultant Jones Lang LaSalle Meghraj Country Head Anuj Puri cautioned that if the corporate debt default in Dubai turns into a sovereign default, there would be real economic issues, which may not only hit India but others also.
"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.
Emaar MGF, a joint venture between Dubai-based Emaar Properties and India's MGF, said its operations are only in
India and the developments in Dubai would have no impact.
"Our business and funding plans are on track," a company statement said. Emaar MGF is in the process of coming up with an initial public offer.
"Emaar has not asked for any external support and maintains good financial strength. Emaar Properties remains committed to its investments and Emaar MGF's business in India," it added.
Last but not the least, it is important to know the view point of the government.
Commerce Minister Anand Sharma has also refuted the fears that the Dubai crisis will have any major impact on India.
"India is a very large economy. It's a resilient economy. I don't think some development in real estate in Dubai will have an impact on the Indian economy," Sharma said.
"As far as India is concerned, the housing, real estate sector and construction industry are all doing well. This is confirmed by the increasing demand for construction materials, cement and steel," Sharma told said.
But Finance Secretary Ashok Chawla was a trifle more circumspect and preferred to watch the situation before hazarding a guess on the impact of Dubai World's woes on the country's economy.
Asked if the crisis will impact money flows into India, since the Gulf region accounts for over half the total inward remittances worth over $25 billion annually from expatriate Indians, Chawla said: "It's unlikely."