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Friday, the Reserve Bank of India governor Duvvuri Subbarao said the central bank is studying the impact of Dubai World debt issues.
"We shouldn't react to instant news like this," Subbarao said in the southern Indian city of Hyderabad. He said the global financial crisis taught a lesson that Indian policymakers must study the developments and measure the extent of the problem and hence study the impact on India.
Wednesday, the Dubai World, the emirate's investment company with liabilities of $59 billion, sought delay of six months to repay its debt. Its subsidiary Nakheel, the developer of palm-islands, has a $3.5 billion Islamic bond maturing on December 14. If creditors grant the request, it will result in a technical default on debt.
The Dubai government announced restructuring of the Dubai World. The government's decision risks undermining investor confidence in Dubai, a Middle East financial hub.
On Friday, global stock markets were rattled by the news as investors worried about the possibility of another global financial system contagion. The Dubai debt default issue came at a time when the global economy was starting to feel slightly confident that it has passed the worst of the global financial crisis triggered by the U.S. sub-prime mortgage fallout.
A boom in construction sector has helped to create an image for Dubai as one of the comfortable place for investments. But the credit-crunch had its worst impact on the economy, forcing constructors to halt work and firing thousands of employees.
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