Greeks defy Europe with ’No’: How India may be impacted

TNN

New Delhi, 06 Jul 2015: Greece lurched into uncharted territory and an uncertain future in Europe’s common currency on Sunday after voters overwhelmingly rejected demands by international creditors for more austerity measures in exchange for a bailout of its bankrupt economy. 

 

Here is how India may be impacted: 

 

Indian markets to see high volatility

Indian shares and bonds fell on Monday, raising fears foreign investors would ride out the uncertainty by paring down riskier holdings in emerging markets. 

 

The NSE index fell more than 1 percent, while the 10-year benchmark bond yield was up 1 basis point, after rising as much as 3 basis points earlier. 

 

The volatility in Indian stock markets is likely to continue. 

 

Indian markets had rallied to 2-12 month high on Friday, posting their third consecutive weekly gain. Earlier this week, markets tumbled on worries that Greece would default on its loan repayments to the International Monetary Fund. 

 

Rupee might depreciate

Economists say there could be some temporary volatility in the financial market and if a Greece exit happens, then rupee might depreciate. 

 

The Indian rupee weakened to 63.5600/57 per dollar compared to its previous close of 63.44/45 in early trading. 

 

India may suffer 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. 

 

India’s software and engineering exports may take a hit

With Greece witnessing a full-blown economic crisis, India’s software and engineering exports may take a hit, industry and government officials warned on Monday. 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.

 

Better prepared this time

Indian authorities say they are drawing up plans to meet any adverse impact on the economy from the crisis. However, economists say authorities are better prepared this time to face any adverse fallout as the situation in Greece has been volatile for some time. Unlike the earlier global financial crisis, authorities have been preparing to deal with any adverse fallout of a Greece exit, but they say there may be short-term volatility. 

 

Domestic demand drives India’s growth

Growth in India is driven by domestic demand and is expected to pick up. Most multilateral agencies see India as a bright spot with GDP growth in 7-8% range. 

 

India has enough forex reserves

RBI governor Raghuram Rajan has said the Indian economy will see through any impact of the Greece crisis. Robust forex reserves, which are at an all-time high of $355 billion, will cushion any possible impact of the crisis 

 

Greece is a short-term risk

Economists say the Greece situation is a short-term risk and authorities must keep a close eye and there should be close coordination between various wings.