India on Friday reacted cautiously to the financial crisis in Dubai, caused by debt repayment crisis of a state firm, saying it would examine the extent of the problem, but maintained that no impact was visible as of now.
While the government exuded confidence that the crisis, which pulled down the stock markets across the globe, should not have any major impact on factors like employment and exports, Reserve Bank said that developments and the extent of the problem need to be studied.
Having asked its officers to study the impact and make necessary recommendations, RBI Governor D Subbarao said: "We should not react to instant news like this. One lesson that we learnt from the (global financial) crisis is that we must study the developments and measure the extent of the problem and hence study the impact on India."
Amid the reaction from global markets, Dubai government promptly promised to pump in all necessary resources for success of Dubai World, the state-owned investment holding company whose request for postponement of $60 billion loan repayment till May had triggered the latest crisis.
Indian stock market lost over 600 points in initial trade, but recovered sharply and ended the day with a 223-point loss as reassuring sentiments expressed by corporates, finance and commerce ministries as also the Reserve Bank of India helped control the erosion.
On Thursday, the markets here had lost more than 400 points amid a plunge in stocks across the world.
"We have seen the press reports. We will have to study what the issue is, what the problem is and what will be the possible implications if any for the Indian economy, in the people, in the corporate. It will take some time for us to examine this," Finance Secretary Ashok Chawla told reporters.
He, however, exuded the confidence that the Dubai crisis was unlikely to have an impact on the employment and remittances saying ex-pats withstood even bigger problems earlier.
Subbarao opined, "We should not react to instant news like this. One lesson of crisis is that we must study the development and measure the extent of the problem. I have requested my officials to study this, and if necessary we will certainly communicate in the public about the likely implications."
The debt crisis in Dubai, chairman of the Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan said, might slowdown remittances but would not have any impact on country's growth.
"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 added.
