Government Says Still to Draw Up Plan To Deal With Any Greek Fallout

Greece Crisis: People line up to withdraw cash from an ATM, on the island of Crete (Reuters)

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, Finance Secretary Rajiv Mehrishi said. The situation in Greece, he said, has no direct impact on India.

Worries over Greece sparked a sell-off in emerging markets on Monday. In India, Sensex plunged over 2 per cent in early trade before recovering to trade 0.70 per cent lower in afternoon trade.

(Read:Sensex Pares Losses After Plunging 600 Points)

“This is a dynamic and evolving situation. There is no firm plan that we can access,” Mr Mehrishi told reporters. “Nobody can predict what the exact situation would be.”

(Read | Greece Crisis: Timeline of Important Events)

The Finance secretary said the fallout from Greece would not have a direct impact on India, but flows would be a potential concern. “The 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,” Mr Mehrishi said.

(Read: Greece Shuts Banks, Limits Daily ATM Withdrawal to 60 Euros)

“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.

The government, he said, is consulting the Reserve Bank of India to deal with the situation.

RBI Governor Raghuram Rajan said last week he expected India’s economy would be able to withstand any impact from the crisis in Greece thanks in part to its foreign exchange reserves, which reached a record high of $355.46 billion as of June 19.