New Delhi/Kolkata: India sees minimal impact from the Greek debt contagion despite some likely capital outflows in the near term, top policy makers said on Monday.
Finance secretary Ashok Chawla said he expected the Greek sovereign debt crisis to have a minimal impact on India, while one of the deputy governors at Reserve Bank of India, Subir Gokarn, said there may not be any impact in the long term.
“There might be some nervousness among investors worldwide which might provoke capital outflows from emerging markets in the short run, so there is a risk of short-term vulnerability of capital outflows,” Gokarn said in a separate event in Kolkata.
European Union finance ministers agreed an emergency loan package on Monday that with IMF support could reach €750 billion ($1 trillion) to prevent a sovereign debt crisis spreading through the euro zone.
Separately, Chawla said India’s inflation was spreading to non-food items.
High manufacturing inflation would be taken into account for policy making going forward as it was more worrisome than food prices, said Gokarn.
The government is looking at raising the foreign institutional investors (FII) investment limit in debt, said Chawla.
“We are looking at that,” Chawla told reporters, when asked whether the government was planning to raise the FII investment cap in both government and corporate debt, currently at $5 billion and at $15 billion respectively.
Chawla also said he did not expect any change in the government’s market borrowing plan in the first half of the current fiscal year that started on 1 April.
The government is on track to borrow Rs2.87 trillion in the period through September. However, higher-than-expected proceeds from the third generation mobile spectrum auction has raised speculation that the government’s borrowing in the first half of 2010-11 could be lower.