Govt, RBI keeping a close watch on Greek situation

“We will have to see how the Euro moves now. We are closely monitoring the Greek situation. There could be some reaction on the Fed rate hike,” Finance Secretary Rajiv <g data-gr-id="54">Mehrishi</g> said here.

“Greece crisis might impact India indirectly,” <g data-gr-id="55">Mehrishi</g> added without elaborating. Meanwhile, Chief Economic Advisor Arvind Subramanian has said the country is relatively well insulated from the Greece situation, however, rupee might get affected to some extent due to <g data-gr-id="63">flight</g> of foreign investment.

“Financial markets are likely to be volatile...India has sufficient forex reserves,” Subramanian said. As many as 61 <g data-gr-id="56">per cent</g> of Greeks voted for a “no” on Sunday, heeding calls from Prime Minister Alexis Tsipras to reject a proposal by the country’s creditors for more austerity to keep finical aid going.

The benchmark BSE Sensex in early trade on Monday fell below the 28,000 mark by plunging more than 250 points as Greeks rejecting creditors conditions put the nation one step closer to exiting from the Eurozone. Last week, industry and government officials have warned that India’s software and engineering exports may take a hit and the country may also face larger capital outflows due to a weaker euro with Greece facing a full-blown economic crisis.

Commerce Secretary Rajeev Kher had said that 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.

Moreover, with Greeks’ rejection of rescue package from creditors spooking markets, the government on Monday asserted that India is well insulated from the <g data-gr-id="72">crisis</g> but rupee may be affected due to the outward flight of investment. “This is a drama which is going to play out for <g data-gr-id="70">sometime</g>. We are well protected in at least three ways. Our macro- economic situation is much more stable. We have (forex) reserves. We are an economy which is still a very attractive investment destination. So I think we are relatively well insulated,” Chief Economic Advisor Arvind Subramanian told reporters here on Monday.

Greeks had on Sunday rejected a rescue package from its international creditors, throwing the future of the country’s Eurozone membership in doubt. “As for the crisis itself, it is going to going to be long and prolonged. Tomorrow is a big meeting of the German and the French head of the states. Let’s see, it is up to Europe to respond,” he said. On the likely impact of the crisis on <g data-gr-id="74">Indian</g> economy, he said, “In these situations what mostly happens is there is <g data-gr-id="75">flight</g> to dollars, to a safe haven. Rupee might also be affected by that. But nothing gets unusual at all so far.” He said as the crisis plays out “financial markets are going to be volatile. Both the ECB and Fed will take this into account.”

Finance Secretary Rajiv <g data-gr-id="50">Mehrishi</g> said <g data-gr-id="60">government</g> is closely monitoring the situation as India may be indirectly impacted.

“We will have to see how the euro moves now. We are closely monitoring the Greece situation. There could be some reaction on the Fed rate hike likely,” he said here. “Greece crisis might impact India indirectly,” he added without elaborating.