The Dubai debt crisis has raised fears of a Lehman replay on economies across

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the world. But how real is it? Can it trigger a market crash like that of 2008? Where will be the spillover effect? Here are the answers...

How big is the crisis?

Krishnamurthy Vijayan

Executive chairman,

JP Morgan Asset Management

I don’t think it’s a crisis of huge magnitude. As far as Indian companies are concerned, I don’t think any of them have huge investments in Dubai. Indian companies that have exposure there will be impacted. But I think the fear factor is too high at the moment.

What impact may it have on the stock market?

Vikram Kotak

Chief investment officer,

Birla Sun Life Insurance

I t’s not a huge crisis for world markets. But, financially we are now interlinked with the global economy and there is bound to be some ripple effect. One needs to remember that this is different from the Lehman Brothers crisis, simply because here they have physical assets to fall back upon, and within the Arab world, Abu Dhabi or Qatar will come up to bail out Dubai. For India, the major concern is if say Abu Dhabi comes forward with a bailout package and decides to cash out its equity and commodities investments to fund the package.

How painful is it going to be?

Dilip Bhat

Joint Managing Director,

Prabhudas Lilladher

We have already gone through a lot of pain from the global credit crisis and I don’t think the Dubai event is going to give us fresh pain. Some individual companies are going to be impacted. But the biggest concern is that it will lead to a crisis of confidence, and that will hit investments. If a nation of high per capita income like Dubai can face such a crisis, a similar situation can surface anywhere.

Can the market get over it quickly?

Raamdeo Agrawal

Co-founder and director,

Motilal Oswal Financial Services

Everything depends on how Dubai handles the situation. Credit-default swaps on Dubai’s sovereign debt rose by 106 basis points. This, I think, shows that there is no panic-like situation. If credit-default swaps had increased by 500-2,000 points, then it could have been a cause for concern. Indian markets will also reflect this trend.

Will Dubai crisis hit gold?

Jim Rogers

Co-founder, Quantum Fund,

Creator of Rogers International Commodities Index

Gold needs a correction since it has gone up so much so fast, Perhaps this will be the excuse. There is always an excuse when something needs to correct.

Will it hurt FII inflow to emerging economies?

Bharat Shah

Chief executive officer,

ASK Investment Managers

Putting all markets under one bracket is fallacious. India is fundamentally a strong and solid economy. I doubt FIIs fund flow into India will reverse due to the debt crisis in Dubai. In the long term, I don’t think the crisis is deep-rooted and long-standing. From that perspective, there will only be marginal impact on markets like India.

Will it lead to any tightening of liquidity?

Abheek Barua

Chief economist,

HDFC Bank

If foreign investors get wary of emerging markets, there could be a flight of capital from these markets to safer havens. If this happens, the liquidity situation in the equity markets will be substantial. Though the direct exposure of Indian banks in the region may not be a cause of alarm, the counter-party risk that banks would have got into needs to be examined. The non-fund base exposures need to be identified.

Will this crisis hit inflow of remittances?

Vayalar Ravi

Union minister for

Overseas Indian Affairs

There is no need to panic. We are not much worried. After the recession hit world economies, lakhs of NRI population had returned home, but remittances in 2008-09 has not gone down as per the RBI statistics.

Is the rupee going to take a hit?

BA Prabhakar

Executive director,

Bank of India

Total remittances to the country is about $50 billion. Of this, close to $10 billion comes from the Gulf region. If this amount is going to dip steeply, we may see an impact on the rupee. Unless we have strong inflows, the strength of the rupee cannot be protected. If the dollar inflows into the country from foreign institutional investors slow down, then the rupee could depreciate.

Will it have a bearing on Indian exports?

Sharad Kumar Saraf

Vice-president,

Federation of Indian

Export Organisation

India has close to $40 billion of exports to Dubai and it is an important transshipment point to destinations like Europe and other places. This is going to be adversely impacted if the Dubai government is not bailed out of the financial mess. We export garments, gems and jewellery. Dubai is the biggest market for gold.

Where is the ripple effect going to be?

Ajay Bodke

Financial analyst; ex-fund manager,

IDFC Mutual Fund

At present, people are downplaying the possible impact on India. Semi-skilled and non-skilled population, mostly from Kerala, Tamil Nadu and Andhra Pradesh, sends home $2 billion per annum. If the economy goes into a tailspin, it will have a ripple effect in the employment scene. The broader issue is whether the crisis will have a domino effect. Since, several western banks have exposure in Dubai World, the crisis will force these banks to tighten their purse strings. Further, investors have doubled or trebled their investments in equity since March-April. These investors will like to take some profit off the table.

Will it hit confidence in the Indian realty sector?

Rajeev Talwar

Executive director,

DLF

The impact will not be on the Indian real estate sector since it is primarily driven by domestic demand. The real impact will perhaps be on employment and remittances.

(Interviews with Bijoy Sankar Saikia, Rajesh Abraham, Manju AB,

Ranjit Bhushan and Sangeetha G)