29 November,2009 12:05 PM IST | | PTI
The Prime Minister's economic panel does not expect the Dubai debt crisis to trigger another meltdown in the world and has retained its forecast of Indian economic growth rate to 6.5 per cent for the current fiscal.
"I don't expect really a slip back as far as the economic recovery is concerned. Most countries in the West have shown positive growth in the third quarter of 2009 and this trend will continue. But as we all know recovery is going to be slow and modest," Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan said here.
Rangarajan said probably the West Asian countries would come to the rescue of Dubai, which may not plunge the world into another financial meltdown. Dubai's USD 80 billion debt woes have sent shock waves around the world, showing how fragile the economic recovery is.
Asked whether the crisis in Dubai would lead his council to revise its forecast for India's economic growth this fiscal, he said, "I do not think so, because Indian economy is driven primarily by the domestic demand." The council pegged Indian economy to grow by 6.5 per cent this fiscal against 6.7 per cent a year ago.
Rangarajan attributed the expected slow down to adverse weather conditions. "Otherwise, growth rate could have been around seven per cent," he said. Last year, the economy slowed down from nine per cent growth rate in the preceding three years.
The Dubai government has promised to pump in resources to ensure long-term success of Dubai World, whose 59 billion dollar debt pile-ups led to the fear of the crisis.
United Arab Emirates capital Abu Dhabi is likely to pick and choose how to assist its debt-ridden neighbour. US and the 16-member euro zone have come out of the recession. After a negative growth in four straight quarters, the US economy posted a 3.5 per cent growth in the third quarter of 2009.
Euro zone posted a 0.4 per cent expansion, after shrinking in the previous five quarters. However, UK continued to be in recession. Indians constitute 40 per cent of Dubai's population and contribute to 10-12 per cent of remittances from Indian expatriates.
Rangarajan also said if Dubai debt crisis aggravates, it may affect remittances from the Middle East. "But, Dubai is only one source, there are other sources, from which remittances come which may not be affected," he added.
