There can be outflow of capital from India due to interest rates in Europe, says the finance secretary
GN Bureau | June 29, 2015
Admitting that the situation in Greece may impact India in capital inflows and outflows, finance secretary Rajiv Mehrishi on Monday said the government is in touch with the Reserve Bank to deal with the issue.
"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.
"Obviously we are in touch with the RBI but they will do what they have to do," he said as uncertainty over Greece pulled down the BSE index, Sensex, by over 500 points in early trade though it recovered in the afternoon.
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India is monitoring developments after the breakdown in talks between Greece and its creditors but does not have a firm plan in place to deal with any significant fallout.
“This is a dynamic and evolving situation. There is no firm plan that we can access,” Mehrishi said. “Nobody can predict what the exact situation would be.”
"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.
Asked if any Indian company has an exposure in Greece, he said, "I don't know."
"If yields on government securities 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.
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