Greek crisis won’t affect India: CEA’s Arvind Subramanian
07/07/2015 15:01

With a robust foreign exchange reserves kitty acting as a strong buffer against any volatility in foreign capital flows due to global headwinds, the country’s top economic experts are of the view that the ongoing debt troubles in Greece which is on the brink of an exit from the euro will not have a major impact on Asia’s third biggest economy, which is exhibiting stronger fundamentals than its emerging market peers helped by the kick-start of the reform cycle.

“This is a drama which is going to play out for sometime. 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, the PTI reported.

Greece which last week became the first developed country to default on its debt to the International Monetary Fund (IMF), on Sunday out rightly rejected the stiff spending cuts and tax hikes demanded by its creditors in exchange for fresh cash, pushing it closer to an exit from the single currency union, an event which may cause ripples across global financial markets and affect capital flows in emerging markets as investors cut risky bets.

While the Greek crisis may have a slight negative impact on the rupee as dollar’s safe haven appeal receives a boost from uncertainty in Europe, forex reserves of over USD 350 billion will provide India a strong cushion to absorb any unfavorable impact on capital flows.