"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.
Transcript of "Zee News Nov 29, 2009 No Impact Of Dubai World Default On India"
No impact of Dubai World default on India: Anand Sharma
Friday, November 27th, 2009 AT 6:11 PM
NEW DELHI: 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 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
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 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 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
"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
"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 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."