Falling real estate prices have wreaked havoc on the rich countries. All sorts of loans and derivatives backed by this property have lost value and brought large parts of the Western financial system to its knees. Indian banks, too, will face problems as the value of the collateral supporting their home loans drops, but this is hardly likely to create a systemic crisis that will require bailouts funded by taxpayers.

But falling property prices and the growing woes of developers will inflict some pain on the Indian economy. Construction now accounts for one-tenth of India's non-agricultural gross domestic product, or GDP. It has been one of the fastest growing segments of the economy. That was evident from the way cranes to build houses and malls had become a common feature of our urban skyline, and the pace at which new ribbons of tar and cement were being laid out to join various points of the country. In fact, for the first quarter of the current fiscal year starting April, construction grew faster than segments such as agriculture, manufacturing and financing: at 11.4%, it easily outpaced the overall 7.9% rate of economic growth.

Slowing construction could then pull down the overall rate of economic growth further, directly as well as indirectly, because of slowing demand for cement, steel, equipment and the like. But there will be effects on job creation and the stock market as well.

Consider employment first. Six out of every 100 working Indians are employed in construction activities. And this number will grow. The Planning Commission estimates in its 11th Plan document that more than one in every five of the 115 million new jobs likely to be created between 2006 and 2016 will be in construction. That is more than the new jobs that will emerge from manufacturing growth. Only the "trade, hotels and restaurants" segment of the economy will create more jobs than construction is expected to. Most of these jobs require few skills and are ideal for the millions who want to escape from rural misery.