The risk of a multi-billion-dollar debt default by Dubai World, ranked among the largest state-run conglomerates in the region, will have little impact on the Indian economy, a senior Indian minister said on Friday.
"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," Commerce Minister Anand 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 reporters here.
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.
"We will have to study what the issue is, what is the problem, what will be the possible implication if any for the Indian economy, the people and corporates," Chawla told reporters in New Delhi.
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."
The state-run Dubai World stunned the global financial world 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.
Indian equities reacted adversely to the development, with the benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE) down as much as 634.16 points, or 3.76 percent, midway into the trading session on Friday.
"Indian markets have rallied more than 100 percent from the lows a year ago, mostly backed by news of recovery and not necessarily on fundamentals," said Jagannadham Thunuguntla of brokerage firm SMC Capital.
"This is why such news will have a negative impact on our markets and we will be dragged down," Thunuguntla, who heads the equities division of the firm, told IANS.
Former governor of the Reserve Bank of India (RBI) YV Reddy expressed concern over the prospect of Indians employed in the Gulf losing their jobs. "Much would depend on its impact on the real economy there and employment," he said.
"It's one thing if property prices or share prices come down. That will affect only one section of people. But how is it going to affect the living conditions, employment conditions, real economic activity in those countries where we are employed?" queried Reddy.
Chawla maintained that the impact on jobs and salaries was "unlikely".