Indian policy-makers see little impact of Dubai World woes

New Delhi, Nov 27 : Indian policy-makers are not really worried over the potential adverse impact on the country's economy because of the multi-billion-dollar debt default risk faced by Dubai World, ranked among the largest conglomerates in the region.

"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," Commerce Minister Anand Sharma said Friday.

"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.

Finance Secretary Ashok Chawla also saw little impact of the Dubai World's woes on the country's economy, even though he was a trifle more circumspect and preferred to watch the situation before hazarding a guess.

"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 outside his office in North Block here.

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 such as realty, infrastructure, logistics and economic zones, not just in the region but across a clutch 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 Friday.

It later recovered and closed with a loss of some 220 points, or 1.3 percent over the previous close.

"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) Y.V. Reddy, though, 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".

Even some Gulf-based companies, like Emmar, which have business interests in India, said there will be virtually no impact on their ongoing projects in India.

"The recently announced plans in respect of debt of Dubai World has no impact on Emaar Properties' financial position or operations or its ability to meet any obligations," Emmar said in a joint statement with its India partner MGF.

"Emaar Properties remains committed to its investments and Emaar MGF's business in India."

The response was similar from India's leading engineering and construction major Larsen and Toubro Ltd, which said its exposure in Dubai was around $20-$25 million.

"Our receivables could become sticky," said R. Shankar Raman, the company's executive president, adding: "The impact on Larsen and Toubro's financial results will not be material."