Impact of Greece Crisis on India: Explained

By siliconindia   |   Tuesday, June 30, 2015
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BENGALURU: Greece’s bailout program ends today and the economy defaults on $ 1.73bn IMF repayment. Greek’s Prime Minister Alexis Tsipras’s decision to close the banks for a week and limit the ATM withdrawals to € 60 sent an alarm to world markets including India.

Here is how India would be affected by Greece Crisis as reported by TOI:

Firstly, India may suffer capital outflows

Rajiv Mehrishi, Finace Secretary India, says that Greece crisis may hit the country’s capital outflows. It is now up on the RBI to deal with the situation. However India’s healthy FOREX reserves will let the situation pass through any crisis from affecting the country.

India’s Software and Engineering Exports May Decline

European Union being one of India’s largest markets for software and engineering exports will naturally decline owing to full-blown economic crisis in Greece. If not directly, India will face impacts from UK, Italy, Turkey and France. Having said that, India is a domestic driven country hence it is prepared to withstand any external impacts.

Rupee might depreciate

As the world is a global village today, volatility in parallel economies along with a country hit by crisis is inevitable. Crisis ridden Greece will certainly have its impacts on global financial markets and yes the rupee may depreciate.

Sharp volatility in stock markets

This is already happening as we saw India's stock markets fall as much as 2.2 percent within one day of Greece’s declaration. The BSE Sensex and Nifty closed at their lowest in nearly two-and-a-half weeks. As of 30th June, Sensex shed losses but is trading higher again. However, Greece poses a short-term risk to India which India can withstand.

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