New Delhi: The Prime Minister`s Economic Advisory Council on Friday said the Dubai crisis would not affect the country`s growth rate, but admitted that remittances from the Gulf city-state may slow down.
The PM`s Economic Advisory Council chairman C Rangarajan
said here that probably the Middle East countries would
come to the rescue of Dubai, which may not plunge the world
into another financial meltdown.
"This particular incident in Dubai may not necessarily
assume the magnitude that will have an impact on our growth
rate. But, there could be some slowdown in remittances. But,
Dubai is only one source, there are other sources, from which
remittances come which may not be affected," Rangarajan said.
The PMEAC had pegged the GDP growth rate to 6.5 percent
this fiscal, and Rangarajan said the projection need not be
revised because of the Dubai crisis.
"I have a feeling that probably the other Middle East
countries would come to the rescue of Dubai and prevent it
from becoming a major crisis," Rangarajan said.
More than one-third of the remittances that the country
receives comes from the Gulf region. It received USD 52
billion from this region last year.
Realty slump turned into a major crisis in Dubai after
its conglomerate Dubai World, which has significant interests
in property feared debt default and asked its creditors to
defer the repayment of around USD 59 billion till May 2010.
Already, the Dubai government has promised to pump in
needed resources to ensure long-term success of Dubai World.
The former RBI governor also said details of the
developments are yet to unfold, after which exact assessment
could be made.
"We do not know yet the details of what has happened in
Dubai, but if there is a default or if there is a request for
rephasing the debt, it will have some impact, but it is too
early to say what that impact will be on India. If Dubai
suffers, then it will have an impact on the migrant Indians
who have gone there and their income may be affected," he
He said Dubai crisis may also not trigger another
financial meltdown in the world. "I don`t expect really a slip
back as far as the economic recovery is concerned. Most
countries in the West have shown positive growth in the third
quarter 2009 and this trend will continue but as we all know
that recovery is going to be slow and modest," he added.