With the Greeks’ rejection of the conditions of a rescue package from creditors spooking markets worldwide, the Indian government has maintained that the country was “well insulated” from the crisis but the rupee may be affected temporarily due to capital outflows.
“This is a drama which is going to play out for some time. We are well protected in at least three ways: Our macro-economic situation is more stable. We have (forex) reserves. We are an economy which is still an attractive investment destination,” chief economic advisor Arvind Subramanian said.
On Sunday, the Greeks overwhelmingly rejected conditions of a rescue package from creditors, deepening the standoff with lenders. “As for the crisis itself, it is going to going to be long and prolonged. Tomorrow (Tuesday) is a big meeting of the German and the French head of states. Let’s see, it is up to Europe to respond,” he said.
The rupee strengthened by 4 paise to 63.40 on Monday after a sharp rebound in local equity markets along with robust capital inflows. With indirect impact on India likely in terms of capital outflows and exports to Europe, the government was in touch with the central bank.