Dubai crisis not to impact India much, says FM

Allaying fears of increased economic turbulence following the Dubai debt crisis, finance minister Pranab Mukherjee said on Saturday it was too early to press the panic button.

While Mukherjee said in the long term, the current crisis would not have much impact on the Indian economy as “the amount is small and the exposure of our banking system is limited in Dubai”, he said an immediate adverse effect could hit home in the form of job losses.

“The immediate adverse effect could be the repatriation of foreign exchange and joblessness of the workforce there. As many as 42.3 per cent of the total population in Dubai is of Indians and Indians; Pakistanis and Bangladeshis combined comprise two thirds of Dubai’s total population. The impact of the crisis is yet to be ascertained,” the finance minister told reporters after he delivered the Haksar memorial lecture here. He said it would be too early to talk of any assistance packages for the workforce as the situation needed to be watched carefully.

While the stock market felt the impact and closed in the red for two days in succession, the finance minister said “no earth-shaking impact” would be seen, especially on exports and FDI inflows.

Earlier, speaking on “Asian economy after the financial crisis: an overview” at CRRID here, Mukherjee said the worst seemed to be over in the context of the global economic downturn but countries could not drop their guard yet as risks remained. “I genuinely believe that as the global economy begins to pull itself out of the crisis, Asia looks set to emerge from the downturn sooner and stronger than any other region,” he said.

The finance minister observed that among the developing countries, in terms of the impact of the crisis, South Asian economies appeared to have been the most resilient so far. “Due to the recovery led by China, East Asia is expected to grow at 4.4 per cent in 2009 and 7.1 per cent in 2010. South Asia is expected to grow at 5.6 per cent in 2009 and 6.4 per cent in 2010,” he said.

Mukherjee remained confident that despite the effects of the slowdown and a poor monsoon, the Indian economy would grow between 6 to 7 per cent this fiscal.

He was however quick to add that even as the economy had entered the recovery mode, care would be taken in withdrawing the stimulus extended to spur demand.

“While an early exit from stimulus measures may hamper the nascent economic recovery, keeping these in place for long may overheat the economy,” he said.

Indian Express

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