Greece debt crisis: Will it affect India?

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New Delhi | Published: June 30, 2015 12:15:48 PM

Finance Secretary Rajiv Mehrishi said the economic crisis in Greece may trigger capital outflows from India and the government is consulting the RBI to deal with the situation.

GREECE DEBT CRISISDemonstrators holding letters to form a banner take part in a protest against the European Central Bank, in Trafalgar Square, London, over Greece’s debt repayments. (AP)

Greece could default on its debts on Tuesday, which could trigger a chain reaction that sees the country fall out of the euro, the currency 19 European countries use. Greece and the creditors are are struggling to agree on the terms to get more loans to the country.

Greece will vote on June 5 to decide on whether to accept painful cutbacks in return for desperately needed financing.

Till now, Greek Prime Minister Alexis Tsipras has been defiant and has urged to voters to reject creditors’ demands, insisting a “No” vote in next Sunday’s referendum would strengthen Athens’ negotiating hand.

Greece’s bailout program ends Tuesday, when the country is unlikely to make a 1.6 billion euro ($1.8 billion) repayment to the International Monetary Fund.

Greece crisis has affected the global markets, including India.

We look at pointers that tell us if India will be affected by Greece debt crisis:

Software and engineering exports

India’s software and engineering exports may take a hit and the country may also face larger capital outflows due to a weaker euro.

Commerce Secretary Rajeev Kher said exports from India would be impacted negatively if the European Union is hit from the Greece crisis, although he ruled out any major direct impact of the prevailing Greek situation.

Engineering exporters’ body EEPC India said the economic crisis in Greece will impact engineering exports from India as European Union is the largest destination for such shipments. The industry body said it sees indirect impact from the UK, Italy, Turkey and France.

Capital outflows

Finance Secretary Rajiv Mehrishi said the economic crisis in Greece may trigger capital outflows from India and the government is consulting the RBI to deal with the situation.

“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,” Mehrishi said.

Stock markets

The benchmark BSE Sensex dropped by more than 600 points in early trade on Monday, but managed to recoup some loses later on selective buying in the beaten-down counters and settled the day lower by 167 points at 27,645.15.

The benchmark BSE Sensex rebounded over 117 points in early trade on Tuesday, after two sessions of losses, on value-buying by investors in select blue-chips amid a recovery at Asian markets despite the ongoing Greece crisis

Indian economy

Assocham said Indian economy is not really centric to Greece directly but if European Union is impacted due to this then India could be affected.

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