The crisis was open to the world when Dubai World asked for standstill till May to pay back its debt that amounts to $60 billion. Dubai World is the state-owned holding company that runs 49 ports of the state. The crisis erupted from Dubai’s mammoth investment in real estate projects. This investment has resulted in a large amount of liabilities and has little cash flow for making the re-payment. Dubai World owns Nakheel, the real estate developer, which came into fame for constructing three palm shaped artificial islands. The investor driven real estate boom that hardly has the matching number of end-users was bound to burst and it happened eventually.
Thoughts of industry leaders
Now, from the Indian perspective what do country’s business strategists and policy makers think about this sudden downslide. India is well-connected to Dubai through its export businesses in more than a particular sector, namely, gems and jewellery, petroleum products, metals, machinery and basmati rice. According to an analysis by Reserve Bank of India a little over 3 per cent of India’s total export can be affected by this development.
The impact will be on the bullion trading since $29 billion of gold from India is being traded in Dubai. There is already a fall of 8 per cent to $ 2.11 billion in jewellery and gems export in October compared to the same month last year. However, industry experts in the country beg to differ. Mr Santosh Srivastava, Managing Director, Gitanjali Jewellery Retail Pvt. Ltd, views the entire episode as an over-bloated crisis. “The Indian economy is going strong and we have enough resources to tide over such crisis. The remittance from Dubai will definitely decrease but the thousands of workers who are working there are in the lower rung of job hierarchy so the impact will not be that large.” China can be the next hub for gold trading following the crisis, he opines. Mr Rahul Gupta, Director, PP Jewellers, comments, “The recent crisis has taken its toll heavily on the real estate market over there, whereas 10-15 per cent of jewellery market has felt the impact.” “The Indian GDP is on a strong growth path and we are seeing the positive signs in jewellery retailing as well. Also, the Dubai situation is hugely exaggerated by the media. The reality is that the constant rise and fluctuation of the gold prices are actually affecting gold jewellery retail in Dubai”, opines Mr Joy Alukkas, Chairman & Managing Director, Joyalukkas Group. While talking about China as the next destination for gold trading, Mr Gupta says, “Indian jewellery has perpetual appeal in the Dubai market and most of its buyers are NRIs. The same cannot be said about Chinese market where look and feel of jewellery is totally different.” On this Mr Alukkas comments, “We have our eyes opened and if in future China moves on to become a strong place for gold trading, we will be ready. But India will never lose its fascination for gold so will continue to remain a very important market for gold trade.”
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