Greek debt crisis to impact engineering exports from India

NEW DELHI: The economic crisis in Greece will impact engineering exports from India as European Union is the largest destination for such shipments, engineering exporters' body EEPC India has said.

However, it may not impact India directly but lead to capital outflows from emerging markets as there have been fears of the cash-strapped European nation missing its debt repayment deadline of June 30.

For April-May this year, engineering exports to EU stood at USD 1.86 billion, as against $1.89 billion in the year-ago period.

"We could face indirect impact from UK, Italy, Turkey and France as well which in any case gave us a negative growth in the first two months of the current fiscal," EEPC India Chairman Anupam Shah said.

The situation may prompt Greece's European partners to shut the door on extending a credit lifeline after the country's surprise move to hold a referendum on bailout terms.

"There is need for RBI and the Finance Ministry to keep a close eye on the muddy global situation and its possible effect on India's capital flows and the currency movement," Assocham Secretary General D S Rawat said.

"With Greek authorities closing banks for a week and imposing severe capital controls, the threat of global contagion must be dealt with a well-coordinated manner," he added.

Greece early today imposed capital controls and closed banks until at least July 6 after Prime Minister Alexis Tsipras decided to call a July 5 referendum on a proposed bailout package.

"With over $355 billion foreign exchange reserves and the country promising to grow at the fastest rate in the world, India can withstand any pressure from Greek crisis.

"However, what is worrying is that the overall situation with regard to India's merchandise exports does not look promising this year and the troubles in Europe could only deteriorate the prospects," Rawat said.