Mumbai: The financial crisis in Greece is not a major concern for Indian exports. However, exports will be affected if the euro zone does not stabilize, commerce secretary Rahul Khullar said in an interview.
“My concerns would primarily be what is happening in (the) UK, what is happening in Germany, Italy, Netherlands, France, Belgium, the other markets where exports are destined,” he said. Edited excerpts:
The crisis in Greece appears to be spreading across the euro zone. Is it a point of concern, or should we just sit back and look at the data as it comes out?
No, I think it is a point of concern. The real issue is this: Greece itself is not a major recipient of our exports—it’s the other countries. The problem really is that contagion from Greece can affect other countries and that can affect demand.
You are going to see two things in next couple of months. One is whether they put enough money behind Greece and Greece actually implements a credible fiscal consolidation program. If that goes through then the risk of contagion abate. If that doesn’t go through and contagion spreads, then you have a big problem on your hands.
Those are problems that will directly impact the demand for exports. There are separate issues concerning the flow of capital and that arises from the crisis in general, which means as long as there is a pressure to deleverage—getting rid of debt—you will see the same sort of things that you saw immediately after the 2008 crisis, which means the scurry to reduce borrowings and switch to cash.
Are you seeing any signs of that?
I suspect when markets are more settled you will start saying that. Right now, everybody is keeping their fingers crossed hoping things workout for Greece in particular and for EU in general. Once things start settling down then the impact on capital markets will be felt in a couple of months. However, if things do not settle down then the effect both on trade and capital market will be instantaneous.
Is that your gut feel at this point?
At this point of time, I don’t want to say anything beyond that because I don’t know. I think the short answer to your question is—is there uncertainty? Yes, it is there still. There is great deal of uncertainty and we wish Greece and Europe well. We hope that they tide over the crisis. It’s good for the world and world economy.
Is it too early to put a number to the expected decline?
I think that’s way too early. As I said Greece is not important as a major destination for my exports. So my concerns would primarily be what is happening in (the) UK, what is happening in Germany, Italy, Netherlands, France, Belgium, the other markets where exports are destined.
Now, as you know even those economies have problems of their own. It’s not as if Greece is just an outlier, meaning all of them are having situations where they need to do some amount of fiscal contraction and some consolidation. So I think it’s way too early to guess what the impact will be. It is a matter of concern that if stability does not return to those markets quickly, there will be an adverse impact on demand for exports.