The crisis of the much-trumpeted ‘superpower of the Middle East’, Dubai, came out into the open at the end of November ‘09 when ‘Dubai World’, a government-owned company, sought a moratorium on repayment of debts until at least May 2010. The capitalist world, celebrating the global economic revival, encountered a rude shock. Dubai is the latest in the series of ‘glamorous bubble’ economies that are bursting owing to globalisation and liberalisation. Dubai was not founded, unlike other UAE (United Arab Emirates) countries, on an oil economy, but was acclaimed as a financial capital and ‘pride’ of the gulf region. The Dubai Crash is the worst-ever manifestation of the brewing crisis in the oil-rich Middle East.
The Indian political elite is not ready to openly accept the impact of the Dubai crisis on the Indian economy. The exodus of blue-collar workers employed in gulf back to their homeland can lead not only to economic crisis but can also turn into a social crisis, particularly in states like Kerala, which is mainly a ‘remittances-driven economy’ rather than one driven by investment/manufacturing.
In Dubai, almost 50 percent of the population are Indians, mainly comprising construction workers from Kerala. In the first phase of global economic downturn itself, more than 2 lakh emigrants have returned to Kerala and are yet to be rehabilitated. It is expected that this might rapidly go up to 5 lakhs, since the emigrants’ numbers in the gulf would be halved soon and this can only trigger a reverse exodus.
A recent survey by Centre for Development Studies (CDS) says that around 90,000 households that received remittances last year have not received any in 2009. The inflow of Rs 43,288 crores to the Kerala economy by way of remittances has had a significant effect on the state’s economy and living conditions, the study said.
The Kerala model is not only of ‘Low growth and high Human Development Index’ but that of more than 25% of GDP drawn from foreign remittances by emigrants and foreign exchange from huge exports, mainly to gulf countries. If Dubai collapses, there is every possibility that Kerala will face a serious and all-round crisis, if not a complete collapse. Neo-liberalism had always preached shifting the crisis of capital onto the labouring people. The Left government in Kerala is unfortunately no exception to this.
CDS expects a decline of 20 percent in coir and coir products exports and job loss of around 32,000. Cashew export is expected to fall by 15% with estimated job loss of 18,000 while marine exports will decline by 30% leading to a job loss of 20,000. Huge declines are expected in various other sectors including spices, plantations and handloom.
Dubai is the gateway for India’s exports to the Middle East. The UAE was India’s top destination for exports for the year ending March this year, displacing the US. The country’s total exports to the UAE, including a major share by Kerala, increased by a whopping 53 per cent.
The HDFC Bank report says that the ongoing crisis in Dubai will impact specific pockets of the domestic economy, and what may seem negligible at an international level, may translate to significant damage for specific segments of the economy.
The central and state governments do not have any efficient and fruitful plan or vision for the rehabilitation and resettlement of gulf returnees. A ‘Pravasi Welfare Fund’ was floated by the state government but the sum of Rs.10 crores allotted was ridiculously low. A non-banking financial institution along the model of interest-free Islamic banking also cannot be a solution to the issue. In spite of positive suggestions like implementation of NREGA, the thrust of the CDS recommendations is however along the lines of liberalisation (for instance, recommending that conducive atmosphere be created for domestic and foreign capital by extending all concessions including land) and can further complicate the situation. Unfortunately, the cabinet sub-committee headed by the Finance Minister is entrusted with the task of implementing these recommendations – while in fact they need to be looked at afresh.
There are class differentiations among returnees as well, which is also a matter of concern while developing an appropriate strategy to deal with the impact of the crisis. There is a need for a complete reorientation of the Kerala model of economy, to base it on elements of the real economy like manufacturing and greater industrialisation with strong linkages with agriculture, without disturbing the existing equilibrium and retaining positives of the present model.
