Dubai crisis may hit remittances: PMEAC
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Last Updated: Friday, November 27, 2009, 20:24
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 said.

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.


First Published: Friday, November 27, 2009, 20:24

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