India on Friday reacted cautiously to the financial mess in Dubai, caused by debt repayment crisis of a state-owned firm Dubai World, 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 panic reactions 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 59 billion dollar 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 RBI helped control the erosion. The sensex at the Bombay Stock Exchange closed at 16,632.01, down 223 points, while National Stock Exchange Nifty closed at 4,941.75 down by 63.80 points.
In Dubai, the local government said it fully expected the fallout from its massive debt problem and promised to pump in all necessary resources to ensure long-term success of Dubai World.
"The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react," Dubai Government's Supreme Fiscal Committee Chairman Shaikh Ahmad Bin Saeed Al Maktoum said in a statement.
He said the government's intervention in Dubai World was carefully planned and "reflects its specific financial position."
"We want to ensure resources are deployed in the full knowledge that they are used to enhance the businesses of the Dubai World Group, build on the restructuring that has already been taking place and ensure long term commercial success," Gulf News quoted Shaikh Ahmad as saying.
Dubai World, an investment company that manages and supervises a portfolio of businesses and projects for the Dubai Government, on Thursday said it would ask creditors for a "standstill" on paying back its USD 60 billion debt until at least May, 2010.
Markets across the world went into a tailspin after the report. The FTSE 100, suffered its worst single-day dip since March on Thursday. Shares in Asian exchanges also got affected by the tremors of Dubai debt crisis.
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