Could Kerala be the next Dubai? The state government there plans to issue sukuks (Shariah blessed Islamic bonds), those funny financial instruments that Wall Streeters sold (read this NYT article and it will tell you how Wall Street hoodwinked them) and got Dubai into so much trouble...

Kerala, the communist-ruled Indian state that relies on Middle East remittances for a quarter of its economy, plans to sell the nation’s first Islamic bonds next year to help pay for infrastructure projects. “The way we see it it’s another form of venture capital,” Finance Minister Thomas Isaac said in an interview in Thiruvananthapuram, the southern state’s main city. “We need long-gestation funds to build airports, high-speed trains and expressways. Islamic finance promises unexplored potential in that context.” Kerala’s government is helping start Al-Barakah Financial Services Ltd. to sell the rupee-denominated bonds and create investment funds that comply with Shariah law’s ban on interest, Isaac said. The venture will tap Indian Muslims and money sent home by workers living in Gulf countries even as a debt crisis in Dubai threatens to shrink the remittances, he said.