The $60 billion-odd Dubai debt crisis could spark an increase in remittances from Dubai, in the short term, as uncertainty and nervousness spook the NRIs confidence in local banks in Dubai. However, a section of analysts says that remittances could see a slowdown in the medium term, due to job losses arising out of the impending debt restructuring of the beleaguered institutions. The financial crisis in the short term might lead to a flight to safety of investments from Dubai, said Mr Amit Rathi, MD, of Anand Rathi broking firm.
Indian banks may witness a marginal increase in inflows as the non-resident Indians in Dubai look to shift their surplus money into safer markets, he added. The inward remittance into India last year was approximately $50 billion, according to RBI figures. Out of this Dubai’s share is around 24 per cent, said bankers. Mr C J George, MD, Geojit Financial Services, said that in the short term income arising out of remittance or investment services could see an increase, due to the rise in inflows into India from Dubai.
However, Mr K Harshan, Executive Director, Federal Bank, said there is no rationale for this argument. All the blue-collared workers remit their money home on a regular basis while the wealthy expatriates use wealth management agencies to invest in other countries. “The money in Dubai is only for the working needs of the people there. There is no investment in Dubai,'’ he said.
Instead, he said that in the next six months there could be a dip in remittances due to job losses. Companies such as like Nakheel, which employ several labourers from countries such as like India and Bangladesh, could see lay-offs, as they carry out debt restructuring, he explained. Mr George also said in the long term Dubai could see a slowdown in investments which, in turn, could hamper further job creation. This would also result in slowdown in remittances. Geojit Financial Services is the only Indian broking firm having operations in Dubai.