Chandigarh, Nov 28 (Inditop.com) Finance Minister Pranab Mukherjee Saturday said there was no need to panic over the potential adverse impact on the country’s economy due to the multi-billion-dollar debt default risk faced by Dubai World, among the largest conglomerates in the region.
“There is no need to press the panic button,” Mukherjee told reporters here after delivering the P.N. Haksar Memorial Lecture at the Centre for Research in Rural and Industrial Development.
“Let us wait and watch what has happened recently. I don’t visualise it is going to have an earth shaking adverse effect,” he said, adding the potential impact on the Indian economy, nevertheless, has to be assessed further.
Asked how the impact would be on the five million Indians working in the Gulf region, accounting for nearly half the inward remittances of over $25 billion annually, Mukherjee said: “I don’t think they will be severely impacted.”
The Federation of Indian Chambers of Commerce and Industry (FICCI), meanwhile, also maintained that no knee-jerk action was required over the woes of Dubai World and felt an intervention by the UAE government was likely.
“In view of the fact that the crisis appears to involve some companies owned by the government and that Abu Dhabi is expected to intervene, it is too pre-emptive to set an alarmist perspective,” said FICCI secretary general Amit Mitra.
“More analysis and deeper understanding needs to go into this issue before one can arrive at a clear understanding of the depth of the crisis and its impact on India,” Mitra said in a statement in New Delhi Saturday.
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 pre-empt default and asked creditors for a six-month deferment.
The conglomerate has a host of companies under its fold with interests in a wide range of businesses such as realty, infrastructure, logistics and economic zones. It operates not just in the region but across a clutch of countries including India.
The total debt of Dubai as an emirate is estimated at $80 billion.
Commerce Minister Anand Sharma sought to smoothen nerves Friday when he and some key policy makers said there was no need to panic over the potential impact of the crisis on the Indian economy.
“India is a very large economy. It is a resilient economy. I don’t think some development in real estate in Dubai will have an impact on the Indian economy,” Sharma said during a press conference at his Udyog Bhavan office here.
“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,” the minister added.
The Reserve Bank of India (RBI), meanwhile, said it would measure the extent of Dubai World’s debt problem as well as its potential impact on Indian economy.
“We should not react to instant news like this. One lesson that we learnt from the global financial crisis is that we must study developments and measure the extent of the problem and we need to study its impact on India,” RBI Governor D. Subbarao said Thursday.
“I have requested my officials to study this and if necessary we will certainly communicate to the public about what the implications are likely to be.”
