DUBAI FINANCIAL CRISIS-

“Impact on Indian economy”

Submitted By:-
Satya Kam Jawal
& Abhishek Saxena
BBA Vth Sem(Finance)
PIMG.
 “DEBT” Trap
 To become world flashy city state owned companies accumulated debt of
over $80 billion (126% of Dubai’s GDP).
 Out of this, “Dubai World” the state owned company have $60 billion of
debt(short term paper) from Worlds Top Banks .
 So, any sort of default is sure to send tremor to the fragile financial market.
 Crisis began when investor of Nakheel ,a real estate developer flagship of
Dubai World considering deferring the payment of Islamic bond ‘sukuk’
that is to come up for payment on 14th December. This irritated the
investors and they pressed the panic button.  The crisis in Dubai triggered
sell off across the world.
 Dubai surprised the financial markets when it asked creditors of Dubai
World to agree to a six-month standstill on debt payments for debt totaling
> $80 Billion.
 Reason why they are not able to pay

• During the recession people from USA and

other country who invested their money at
Dubai want it back to fill their losses and they
start selling their property .Result of this price
are fall down to 50%in last year and this year
reduced 30% more Amount was expected is
US $17 Trillion
•  
 WHY DUBAI WORLD CRISES ?
1. Out of control spending
For eg:- Dubai's famous hotel, the Palazzo Versace hotel -have refrigerated
beaches .
2. Lack of Future Planning
Dubai is a hot arid desert coastal town distant to vital strategic assets.
For instance, Dubai has to ship fresh water .
Investment was invested mainly in hotels and big resorts and not in education.
Have no plan for any oil shortages(will be a ghost town without proper oil plan).
3. Poor Management
Eg: The World Island hotel has man made islands where ships and trucks of
sands have to be move to build these islands. At the moment, these islands
are sinking. Billions of dollars was wasted. Also, hundreds of apartments are
left empty because of too much construction of apartments close together
and too fast. This is a result of poor management.
 What is Dubai World
• Dubai World is Government Company having
central role in Dubai economy during the
constriction boom they borrowed the sum of
US $ 60 billion for investing in real state
development .This amount is the big part of
UAE Loan which is Us $80 Billion
BURJ KHALIFA PALM JUMEREIAH
 INDIA & DUBAI
• Dubai employs around 10 lakh Indian( mainly south indian
keralites) .The remittance from the Dubai region is in the range of
$8.7 billion (20% of the state GDP)in 2008.
• India export to UAE stood a $23.92 billion in 2009 .
• Dubai world crisis will affect:- Real state, Banking and Constructions
business.

Indian Company having exposure are:-

1. Nagarjuna Constructions have Rs 1400 Crore of flat project in
Dubai.
2. L&T invest about $200 million.
3. Voltas of about Rs 400 crore
 4. BANK OF BARODA: The bank has exposure in Dubai real estate which
is to the tune of 5-6% of the total loan book. Bank of Baroda has 10
branches in the region.
5. OMAXE: The real estate developer is planning to exit two real estate
projects in Dubai. Company has planned an investment of Rs 2850
crore.
6. SPICE JET: Dubai World investment arm Istithmar holds 13% stake in
the Spice Jet.
7. ABAN OFFSHORE: The Company has deployed 6 rigs in the West Asia.
8. GEOJIT FINANCE: Kerala based brokerage firm has major client base in
the Middle East region. Any crisis in the region will affect its top line.
9. FEDERAL BANK: South Indian bank does major business from the
Middle East region. It provide for the remittance and other service. Any
problem will directly or indirectly hit the bank
 
 Effect on Indian Bank
• According to RBI Indian Bank having lesser
exposure than other countries bank .
• BOB exposure is 6.6% of their loan book .
• SBI having 0.2% of their loan book .
• ICICI and CBI having less stake.
• Percentage Indian Bank Branches having stake
in Dubai are BOB:6, SBI:1, UBI:1, ICICI:1.
•  
 IMPACT ON INDIAN ECONOMY
• Dubai world, has business tie-ups in different countries
including India.Thus projects, may be delayed( resulting in
cost increase), or dropped, or prolonged.
• Unemployment problem may arise in Dubai. Enterprises may
have to retrench a portion of their employees.50 lakh Indians
are working in Dubai and other UAE countries.
• FII’s who have business ties with Dubai World, may face loss.
70 financial institutions have lent credits to Dubai world.
• Banks in Duabi may face crisis.
• When the world is recovering from last year's economic
recession, this may push it back to same position.
 CONCLUSION
• The situation is very fluid and time is difficult for Dubai. Dubai
World is probably in a mess due to cash-flow mismatch.
• Inspite of all these, experts hope that it is possible to recover.It
comes out of past experience. Dubai had faced similar economic
crisis in 1999.Then Abudhabhi, another emirette in UAE, had
helped Dubai by lending a loan of $1,00,000.Abudhabhi is a
financially stable country..It can help.
• But the quantum of need this time is muchmore than it was in
1999.Just on 29th,November,Abudhabhi has announced that it
would consider the financing aspect,item wise, taking each main
transaction on merits.It has also clarified,it is not going to take
full responsibility of all loans.
THANK YOU