Chandigarh, November 28
The Dubai debt crisis is not likely to have an adverse impact on the Indian economy, but it can affect remittances and render a large number of Indians jobless, asserted Finance Minister Pranab Mukherjee here today.

The Finance Minister, while speaking to reporters on the sidelines of the Haksar Memorial Lecture at the Centre for Research in Rural and Industrial Development (CRRID), said the money involved in the Dubai debt crisis was too small to have an impact on the world economy. He said as far as India was concerned, its banking system had very limited exposure to the Dubai financial system as far as foreign direct investment (FDI) was concerned.

Pranab said due to these reasons, there was no need to press the panic button. He said the repatriation of finances to India could, however, be affected as the crisis could lead to joblessness. He said more than 40 per cent of the work force in Dubai was of Indian origin. “We will have to monitor the situation”, he said, adding that he, however, did not visualise any “earth-shaking” impact.

Though India might not be affected by the Dubai crisis, the minister made it clear in his lecture later that Asian economies were not decoupled from the rest of the world, particularly the United States. He said these were, however, less affected due to strong macro-economic fundamentals, including low inflation and favourable fiscal and current account positions.

Speaking about India, Mukherjee said the country’s economy had shown remarkable resilience because the RBI had taken pre-emptive steps to contain bank exposure to the real estate bubble in the domestic economy.

He said the rural economy, which accounted for a sizeable share of private consumption demand, played an important balancing role. He said while the rural economy remained largely insulated from the crisis, the debt relief to farmers, higher minimum support price for agriculture produce and rural infrastructure development through programmes like the Bharat Nirman and NREGA helped increase aggregate demand and rebalanced the decline in other sectors.

Mukherjee said in 2009-10, the economic growth was expected to be in the range of 6 to 7 per cent in the country despite the delayed monsoon and floods. “The effort now was to bring the economy back on the growth path of 9 per cent per annum at the earliest”, he said, adding that the growth rate which had dipped to 5.8 per cent in the third quarter of 2008, had gone up to 6.1 per cent in the first quarter of 2009-10.