New Delhi | Worried that the Greek crisis may trigger capital outflows, Finance Secretary Rajiv Mehrishi today said the government is in touch with the Reserve Bank which will take necessary steps to deal with the issue.
Obviously we are in touch with the RBI but they will do what they have to do, he told reporters here as uncertainty over Greece pulled down the BSE index, Sensex, by over 500 points in early trade though it recovered in the afternoon.
The situation in Greece has no direct impact on India, he said but added that there may be some indirect effect via Europe on capital inflows and outflows here. Greece crisis does not have any effect directly on India. (But) interest rate may firm up in Europe. In case of firming up of interest rate in Europe, there can be outflow of capital from India, he said.
Terming the situation as dynamic and evolving, he said, the crisis may have an indirect impact on India by way of its outcome on the European currency euro. To the extent it affects the euro, there might be some indirect impact on India. If yields on euro bonds go up, then it might impact inflows and outflows from India, he said. Mehrishi said nobody can predict how the situation will evolve. Asked if any Indian company has an exposure in Greece, he said, I don’t know.
If yields on G-Sec go on in the US, then it might impact inflows and outflows in India. We really don’t know how they (foreign investors) will relocate their portfolio, he added. There have been fears of the cash-strapped European nation missing its debt repayment deadline of June 30. The situation may prompt Greeces European partners to shut the door on extending a credit lifeline after the country’s surprise move to hold a referendum on bailout terms.
Greece early today imposed capital controls and closed banks until at least July 6 after Prime Minister Alexis Tsipras decided to call a July 5 referendum on a proposed bailout package. On exports, Mehrishi said India’s exports will not be impacted. According to Chief Economic Adviser Arvind Subramanian, India is responding to the Greek crisis in line with other global economies. So far, there is no cause of worry on Greece development, he said.
Commenting on the impact of Greek debt crisis on India, Commerce Secretary Rajeev Kher said it will not have much impact on India’s export. India does not have large exposure to Greece as far as trade is concerned, he said. However, he said that if European Union is hit, it could have negative impact on India’s trade. Industry chamber Assocham said Indian economy is not really centric to Greece directly but if European Union is impacted due to the crisis, then India could be affected.
Europe is Indias largest trading partner with USD 129 billion of merchandise engagement in 2014-15. Of this the European Union bloc accounted for USD 99 billion with UK, Germany, France, Italy being the leading partners. With over USD 355 billion foreign exchange reserves and the country promising to grow at the fastest rate in the world, India can withstand any pressure from Greek crisis, Assocham said.
However, what is worrying is that the overall situation with regard to Indias merchandise exports does not look promising this year and the troubles in Europe could only deteriorate the prospects, the chamber’s Secretary General Mr D S Rawat said.
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