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Yes, there is discrimination on a class basis. Two types of Indians exist in Dubai, the labourers who are the bottom of the pile and the middle upper/class Indians. The labourers in Dubai came from the lowest class in India. The second group of Indians experience less discrimination. All in all, Dubai, as all Arab countries, is a Nationalist government, this means that getting a passport is very hard and the rules favour locals. While Nationalism is understandable, it can, like all other ideologies,lead to fringe elements that are racist.
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