By Patrick Jonas

OLD-TIMERS will tell you that Dubai's early growth as a trading port had a lot to do with Indian workers.

Newcomers to the desert city don't need to be told about who is building the numerous high-rise edifices that dot the city. They just have to look around. Indians simply outnumber all other races. They form nearly half the population of Dubai while locals number only 18 per cent.

So when Dubai suffers a jolt, its repercussions are bound to affect India and Indians. Or has India grown immune to such shocks?

tabla! takes a closer look at the impact the financial crisis in the desert emirate will have on India and Indians.

Stock market

THE Indian stock market was not prepared for two surprises in three days - the Dubai announcement and the Indian GDP results.

On Nov 26, Dubai World, with total debts of US$59 billion, asked creditors to postpone its forthcoming payments until May next year. The following day, markets tanked all over the world. The Bombay Stock Exchange lost 390 points.

A sweet surprise came when the markets opened after the weekend. India's Central Statistical Organisation announced that the country's Gross Domestic Product grew 7.9 per cent from a year earlier in the July-September period.

If not for the Dubai crisis, India's markets would have soared much higher on hearing this news. After all, a Dow Jones Newswires poll of 13 analysts before the announcement had forecast only a 6.3 per cent rise - considered very bullish.

The markets are slowly digesting the news and stocks are on the way up in India, while the rest of the world is dusting its way out from the Dubai desert storm.

OCBC Bank's vice-president (wealth management, Singapore) Vasu Menon tells tabla!: "The Dubai crisis is unlikely to have a significant impact on India where the banking system and real estate sectors do not have much exposure in Dubai. India also enjoys strong fundamentals. India's exceptional growth prospects should augur well for its stock markets and the Dubai crisis is unlikely to derail the bourse's promising medium-term prospects."

Real estate

THE Indian property developers who did venture into Dubai are likely to be impacted in a big way.

Jones Lang LaSalle Meghraj's chairman and country head for India Anuj Puri tells tabla!: "There will be a negative impact on Indian developers in Dubai, since this is a situation where prices are expected to come down in Dubai. These players would have acquired projects to sell them at a particular price. With pricing taking a beating, the profitability of these projects is reduced.

"Construction companies who had gone to Dubai to carry on contract jobs would also be affected, since payments would get delayed and project sizes will be curtailed, thereby affecting their bottom-line. Many projects will get delayed or trapped, meaning a decrease in business. Commitments from Dubai-based companies into India will
also reduce."

Those involved in construction in Dubai include Nagarjuna Constructions, Larsen & Tubro, Omaxe and BSEL Infra.

Indian workers

OVERSEAS Indian affairs minister Vayalar Ravi feels that the government does not anticipate a surge in people returning from Dubai and is confident that the crisis will blow over.

But Kerala finance minister T.M. Thomas Isaac has told the media that he is very "anxious" about the possible slowdown in construction activity. He thinks that could take a toll on workers from the state who are in that industry and form the majority of Indians in Dubai.

India's consul-general in Dubai Venu Rajamony had this to tell tabla! in an e-mail: "The recent announcement
by Dubai World had no direct impact on India and there is no cause for any kind of panic. This decision is not going to lead to any sudden job losses of Indians or an exodus back to India."

Prof Mukul Asher from the LKY School of Public Policy, who specialises in social security issues in Asia, tells tabla! the impact on Indian workers would depend on the extent to which economic activity in labour intensive sectors, such as construction and tourism, is impacted.

"The crisis however underscores the need for high remittance-dependent economies such as Kerala that it is essential to create conditions to utilise human capital, a result-oriented mindset and entrepreneurship that returnees from overseas bring to the local economies," says the professor.

"These returnees require appropriate social and physical amenities, such as schools, health facilities, and housing; and a friendly business environment if the origin states (and countries) are to benefit from overseas workers on a sustainable basis."

Banks

IN RECENT years, Indian banks have made significant progress in expanding their network overseas and Dubai is one city where many set up shop.

According to The Times Of India, the crisis may not have a major impact on India's big banks, barring Bank of Baroda. That bank's total exposure in Dubai is around Rs4,000 crores.

Its chairman M.D. Mallya, however, told the paper "we feel that the asset quality (in which we have invested) is good. We don't foresee any major impact of the Dubai crisis".

The Reserve Bank of India has asked Indian banks to furnish details of their lending to Dubai-based firms as a pre-cautionary step. Indian media reported that State Bank of India, which was recently granted a full-fledged banking licence in the UAE, does not have significant exposure in Dubai yet.

Entertainment

THE crisis rattled Bollywood initially. The Dubai premiere of Paa, the big Amitabh-Abhishek Bachchan starrer, was called off by the distributor Reliance Big Pictures. Some concerts and shows were also cancelled.

The Middle East, particularly Dubai, is one of the biggest overseas markets for the Mumbai film industry,generating almost 50 per cent of its international revenue.

Movie analyst Komal Nahata told the Hindustan Times: "For an A-grade film, over 40 per cent of the collection comes from overseas and Dubai contributes a major 10 to 15 per cent. Dubai is one of the few overseas markets where Hindi films release on Thursdays.

A bad audience response there, in the wake of the crisis, would affect the business here in India. So producers might skip releasing their films in Dubai for a while."

Bollywood's stake in Dubai goes beyond movies. Shah Rukh Khan owns a 5,000 sq ft villa costing Rs8 crores in The Palms and has some investment in a beachfront residential development called Shahrukh Boulevard.

Hrithik Roshan, Kareena Kapoor and Suniel Shetty have also reportedly invested in the city's real estate market while Abhishek and wife Aishwarya own a designer villa in Sanctuary Falls, a resortstyle villa community within Jumeirah Golf Estates.

Other Businesses

The UAE was India's top destination for exports for the year ending March this year, displacing the US. The country's total exports to the UAE grew by a phenomenal 53 per cent to US$23.92 billion this financial year from US$15.63 billion in 2008.

Dubai is the gateway for India's exports to the Middle East and this is unlikely to change in the near future.

Fashion designer Neeta Lulla, who has Dubai clients regularly visiting her Mumbai outlet, tells tabla! that they have cut spending by 25 to 30 per cent: "They are still spending on essentials since it is the wedding season but the frivolous spending has been curbed."

Dubai has investments in India too. DP World, part of Dubai World, runs five container terminals in India, accounting for 40 per cent of India's container traffic. The company has invested over US$2 billion in India and had said it would spend US$12 billion more in the next five years.

Mr Rajamony, India's consul-general in Dubai, says that "officials of the Dubai Port World have reassured us that their projects in India will continue as before and there is no reduction in their commitment or investments in India.-tabla!