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A day after Greece voted against another round of austerity measures imposed by Euro zone creditors, Indian government officials said the impact on Asia's third largest economy from the latest chapter in the prolonged crisis in Europe would be minimal but there might be some investment outflows.
After five years of economic crisis and mass unemployment, Greek electors voted 61.3 per cent 'No' to the bailout conditions rejected by their radical Left government, heightening the risk of Greece's exit from the Euro zone.
The euro tumbled against the dollar on Asian markets after the setback for Europe's monetary union, and European shares and bonds took a hit when markets opened after the weekend. But the losses were contained and there was no sign of serious contagion to other weaker Euro zone sovereigns.
Asian stocks suffered the biggest daily fall in two years, partly because of fears over China's economy.
Chief Economic Advisor Arvind Subramanian and Finance Secretary Rajiv Mehrishi both allayed any concern regarding the referendum's impact on Indian markets.
"This is a drama, which is going to play out for some time. We are well-protected in at least three ways. Our macro economic situation is much more stable. We have the (forex) reserves. We are an economy which is still a very attractive investment destination," Subramanian told reporters on Monday. He said India remained well-insulated but the crisis in Europe was "going to be long and prolonged. Tuesday is a big meeting of the German and the French heads of the state. Now, it is up to Europe to respond." He did concede that the rupee could be affected as there may be dollar outflows.
Last week, the business and government officials had warned that India's software and engineering exports might take a hit and the country might also face larger capital outflows due to a weaker euro, with Greece facing a full-blown economic crisis.
